uploads/2016/08/ecl-pm.png

Water, Hygiene Spaces Paid Off for Ecolab in 2Q16

By

Updated

Price movement

Ecolab (ECL) has a market cap of $36.3 billion. It rose by 3.5% to close at $122.81 per share on August 2, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 2.6%, 3.3%, and 8.1%, respectively, on the same day.

ECL is trading 2.8% above its 20-day moving average, 3.4% above its 50-day moving average, and 8.3% above its 200-day moving average.

Article continues below advertisement

Related ETF and peers

The PowerShares Water Resource Portfolio ETF (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 11.4% on August 2.

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

  • 3M (MMM) — $107.6 billion
  • Danaher Corporation (DHR) — $55.7 billion
  • ServiceMaster Global Holdings (SERV) — $5.2 billion

Performance of Ecolab in 2Q16

Ecolab reported 2Q16 net sales of ~$3.3 billion, a fall of 2.1% compared to net sales of ~$3.4 billion in 2Q15. Sales from its Global Industrial and Global Institutional segments rose by 4.4% and 8.4%, respectively, and sales from Global Energy fell by 13.0% in 2Q16 compared to 2Q15. The company’s cost of sales as a percentage of net sales rose by 0.96%, and its operating income fell by 5.8% in 2Q16 compared to 2Q15.

Its net income and EPS (earnings per share) fell to $258.4 million and $0.87, respectively, in 2Q16 compared to $302.0 million and $1.00, respectively, in 2Q15. It reported adjusted EPS of $1.08 in 2Q16 and 2Q15.

Ecolab’s cash and cash equivalents rose by 80.4%, and its inventories fell by 4.1% in 2Q16 compared to 4Q15. Its current ratio and debt-to-equity ratio rose to 1.0x and 1.73x, respectively, in 2Q16 compared to 0.93x and 1.67x, respectively, in 4Q15.

Projections

Ecolab has made the following projections for fiscal 2016 and fiscal 3Q16:

Fiscal 2016

  • It expects adjusted gross margin of ~48%, which excludes special gains and charges.
  • It expects net interest expense of ~$270 million.
  • It expects adjusted tax rate of ~26%.
  • It expects non-controlling interest of $0.04–$0.08.
  • It expects adjusted EPS of $4.35–$4.50, which excludes special gains and charges.

Fiscal 3Q16

  • It expects adjusted gross margin of 48%–49%, which excludes special gains and charges.
  • It expects net interest expense of ~$66 million.
  • It expects adjusted tax rate of ~26%.
  • It expects non-controlling interest of $0.01–$0.02.
  • It expects adjusted EPS of $1.24–$1.32, which excludes special gains and charges.

Now, we’ll take a look at Pitney Bowes.

Advertisement

More From Market Realist