Credit Suisse Raised Ecolab Price Target to $109 per Share

Ecolab (ECL) has a market cap of $32.7 billion. ECL rose by 0.48% to close at $110.53 per share on March 24, 2016. The price movements on weekly, monthly, and year-to-date (or YTD) bases were 2.5%, 8.6%, and -3.0%, respectively.

Currently, ECL is trading 4.5% above its 20-day moving average, 5.0% above its 50-day moving average, and 0.96% below its 200-day moving average.

The PowerShares Water Resource Portfolio (PHO) invests 7.6% of its holdings in Ecolab. The ETF tracks a modified liquidity-weighted index of US-listed companies that create products to conserve and purify water. The YTD price movement of PHO was -0.69% as of March 23, 2016.

The market caps of Ecolab’s competitors are as follows:

• Danaher (DHR): $65.1 billion
• Rollins (ROL): $5.9 billion
• ServiceMaster Global Holdings (SERV): $4.9 billion

Credit Suisse has rated Ecolab as “neutral.” It set the price target at $109 from $107 per share.

Ecolab (ECL) reported fiscal 4Q15 net sales of $3,412.0 million, a fall of 7.3% compared to net sales of $3,680.8 million in fiscal 4Q14. The sales of the Global Industrial and Global Institutional segments rose by 4.1% and 5.4%, respectively, in fiscal 4Q15. The sales of the Global Energy segment fell by 13.6% in fiscal 4Q15 compared to fiscal 4Q14.

Its net income and EPS (earnings per share) fell to $208.9 million and $0.69, respectively, in fiscal 4Q15 compared to $335.5 million and $1.10, respectively, in fiscal 4Q14.

In fiscal 2015, Ecolab reported net sales of $13,545.1 million, a fall of 5.1% year-over-year. Its net income and EPS fell to $1,002.1 million and $3.3, respectively, in fiscal 2015, compared to $1,202.8 million and $3.93, respectively, in fiscal 2014.

Meanwhile, its cash and cash equivalents and inventories fell by 55.7% and 5.4%, respectively, in fiscal 2015. Its current ratio fell to 0.93x and its DE (debt-to-equity) ratio rose to 1.7x in fiscal 2015 compared to a current ratio and DE ratio of 1.1x and 1.6x, respectively, in fiscal 2014.

Ecolab’s price-to-earnings and price-to-book value ratios were 33.2x and 4.7x, respectively, as of March 24, 2016.

Ecolab made the following projections for fiscal 2016:

• It expects mid-single-digit fixed currency sales growth in institutional, industrial, and other segments.
• The adjusted gross margin, excluding special gains and charges, is expected to be 47%–48%.
• It expects an adjusted tax rate of ~26%.
• The non-controlling interest should be $0.06–$0.10.
• The adjusted EPS, excluding special gains and charges, are expected to be $4.35–$4.55.

Ecolab made the following projections for fiscal 1Q16:

• The adjusted gross margin, excluding special gains and charges, is expected to be ~47%.
• The company anticipates an adjusted tax rate of ~26%.
• The non-controlling interest is expected to be $0.01–$0.02.
• The adjusted EPS, excluding special gains and charges, are expected to be $0.73–$0.80.

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