Ecolab Inc. ECL has been gaining from its solid product portfolio. The optimism, led by a solid fourth-quarter 2024 performance, along with continued focus on research and development, is expected to contribute further. However, macroeconomic concerns persist.
This Zacks Rank #3 (Hold) stock has rallied 8.7% in the past six months against the industry’s 0.5% decline. The S&P 500 Composite has increased 8.7% during the same time frame.
The renowned water, hygiene and infection prevention solutions and services provider has a market capitalization of $76.3 billion. It projects 13.8% growth for the next five years and expects to maintain a strong performance in the future. Ecolab’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 0.91%.
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Reasons Favoring Ecolab’s Growth
Strong Product Portfolio with Focus on R&D: Ecolab’s diverse product portfolio across water treatment, hygiene, life sciences, digital solutions, and pest elimination is a key competitive advantage reinforced by consistent R&D investments. The global water treatment systems market, valued at $38.56 billion in 2023, is projected to grow at an 8.1% CAGR through 2030, offering significant growth potential.
Ecolab's innovative products, like the 3D TRASAR AI Dishmachine Program and Ecolab 3D Cloud platform, leverage IoT and AI to optimize performance and resource efficiency. The company's ultra-purification portfolio, expanded through the Purolite acquisition, addresses rising demand in biopharmaceutical and gene therapy manufacturing. Management's commitment to innovation and CapEx-driven growth strategy positions Ecolab as a technological leader in high-margin, high-growth sectors.
Ecolab’s Global High Tech Business & Digital Platform: Ecolab’s Global High Tech business and Ecolab Digital Platform are two key high-growth, high-margin engines driving the company's transformation. The Global High Tech business, serving data centers and microelectronics industries, surpassed $300 million in annual sales with 20%+ operating margins, leveraging rising demand for liquid cooling systems amid AI-powered infrastructure growth.
Meanwhile, the Ecolab Digital Platform integrates IoT devices, AI software, and cloud analytics across 100,000+ customer systems, optimizing water usage, energy efficiency, and hygiene compliance while generating recurring revenue streams. Capturing over 120 billion data points in 2024, the platform enhances service productivity and margin expansion by enabling remote monitoring and predictive maintenance.
Strong Q4 Results: Ecolab’s solid fourth-quarter 2024 results buoy optimism. The company registered a robust year-over-year uptick in its top and bottom lines, along with solid performances across most of its segments. The expansion of both margins bodes well for the stock.
Per management, growth in the United States (ECL’s largest and most profitable region) continued to be strong, and growth across the rest of the world was also solid as the company was able to offset uneven macroeconomic trends. This looked promising for the stock. In the fourth quarter, ECL’s gross and operating margin expanded 135 and 141 basis points, respectively. This bodes well for the stock.
A Factor That May Offset ECL’s Gains
Macroeconomic Factors: Ecolab's operations across 170 countries expose it to geopolitical, economic, and currency-related risks. The company limited its Russian business to essential life-supporting operations amid the Ukraine conflict, impacting revenue and potentially scaling back further based on future developments. Past disruptions like the COVID-19 pandemic, supply-chain challenges, inflation, and high interest rates have also pressured profitability. In 2025, currency translation is expected to reduce reported sales by 3% and adjusted EPS by 4%, posing a headwind that could disproportionately affect margins in lower-profit international markets despite improvements in core business performance.
Estimate Trend
Ecolab is witnessing a positive estimate revision trend for 2025. In the past 30 days, the Zacks Consensus Estimate for its earnings has moved 18 cents north to $7.54 per share.
The Zacks Consensus Estimate for the company’s first-quarter 2025 revenues is pegged at $3.7 billion, indicating a 1.4% decline from the year-ago quarter’s reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Masimo MASI, Boston Scientific BSX and Cardinal Health CAH. At present, Masimo sports a Zacks Rank #1 (Strong Buy), whereas Boston Scientific and Cardinal Health carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Masimo’s shares have rallied 30.1% in the past year. Estimates for MASI’s 2024 earnings per share (EPS) have increased 1.2% to $4.10 in the past 30 days. MASI’s earnings beat estimates in each of the trailing four quarters, the average surprise being 17.1%. In the last reported quarter, it posted an earnings surprise of 16.6%.
Estimates for Boston Scientific’s 2025 EPS have jumped 2.9% to $2.85 in the past 30 days. Shares of the company have surged 56.7% in the past year compared with the industry’s growth of 12.5%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.25%. In the last reported quarter, it delivered an earnings surprise of 7.69%.
Estimates for Cardinal Health’s fiscal 2025 EPS have increased 1.5% to $7.94 in the past 30 days. Shares of the company have gained 15.2% in the past year against the industry’s 4.1% decline. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 9.6%. In the last reported quarter, it delivered an earnings surprise of 10.3%.
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