Ecolab Inc. (ECL Quick QuoteECL - Free Report) reported third-quarter 2022 adjusted earnings per share (EPS) of $1.30, down 5.8% year over year. The bottom line missed the Zacks Consensus Estimate by 2.3%.

GAAP EPS for the quarter was $1.21, up 8% year over year.

Revenue Details

Revenues grossed $3.67 billion in the reported quarter, up 10.5% year over year. The metric slightly missed the Zacks Consensus Estimate of $3.68 billion.

Ecolab’s fixed currency sales increased 15.6%. Acquisition-adjusted fixed currency sales increased 12.8% from the prior-year period’s level. The year-over-year uptick in the third quarter’s top line was driven by robust total pricing and solid organic volume growth.

Segmental Analysis

The Global Industrial segment’s fixed currency sales of $1.82 billion reflected 16.1% reported growth whereas acquisition-adjusted fixed currency sales rose 16% year over year. Strong double-digit growth was witnessed across all divisions on the back of accelerating total pricing and new business wins.

The Global Institutional & Specialty arm’s fixed currency sales of $1.18 billion reflected reported as well as acquisition-adjusted fixed currency growth of 12% year over year. The strong growth in the Institutional division reflected robust volume gains, accelerating total pricing, good new business wins and innovation. Specialty sales showed robust growth on strong quickservice sales.

The Global Healthcare and Life Sciences arm’s fixed currency sales of $375.5 million improved 34%. Acquisition-adjusted fixed currency sales were flat year over year on the back of double-digit growth in Life Sciences, offset by modestly lower Healthcare sales.

Ecolab Inc. Price, Consensus and EPS Surprise

Ecolab Inc. price-consensus-eps-surprise-chart | Ecolab Inc. Quote

Healthcare sales declined versus the prior year as accelerating pricing was more than offset by continued softness in Europe.

The Other segment’s fixed currency sales of $362.1 million improved 13% on a reported basis, while acquisition-adjusted fixed currency sales also jumped 13% year over year. The uptick was led by double-digit gains in Pest Elimination, Textile Care and Colloidal Technologies businesses.

Margin Analysis

In the quarter under review, Ecolab’s gross profit improved 5.6% to $1.38 billion. However, the gross margin contracted 180 basis points (bps) to 37.5%.

Selling, general and administrative expenses rose 5.4% to $876.9 million year over year.

Adjusted operating profit totaled $528.4 million, gaining 3.1% from the prior-year quarter’s level. Adjusted operating margin in the quarter contracted 140 bps to 14.5%.

Financial Position

Ecolab exited third-quarter 2022 with cash and cash equivalents of $112.9 million compared with $124.9 million at the end of the second quarter. Total debt at the end of third-quarter 2022 was $8.52 billion compared with $8.79 billion at the end of second quarter.

Ecolab has a consistent dividend-paying history, with five-year annualized dividend growth being 4.72%.

Guidance

Ecolab did not provide either quarterly or full-year 2022 view due to continued uncertainty surrounding the COVID-19 pandemic and other macroeconomic factors.

However, the company expects sales to continue its strong growth whereas earnings will progressively improve but at a more moderate pace than previously anticipated in the fourth quarter of 2022.

Our Take

Ecolab exited the third quarter with revenues and earnings both missing estimates. However, the company registered a robust year-over-year uptick in its top line, along with solid performances across all its segments. Strong volume and pricing momentum are also encouraging. Ecolab’s new business wins and innovation pipelines are well-positioned to drive growth and its global leadership. The company’s digital capabilities are also continuing to broaden, develop and add competitive advantages, which are encouraging.

However, the company faced significant product cost inflation and unfavorable currency translation, which weighed on its top-line growth. Contraction of both margins also does not bode well. The fact that it is yet to provide any financial outlook raises our apprehensions.

Zacks Rank and Stocks to Consider

Ecolab currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Elevance Health, Inc. (ELV Quick QuoteELV - Free Report) , Medpace Holdings, Inc. (MEDP Quick QuoteMEDP - Free Report) and Accuray (ARAY Quick QuoteARAY - Free Report) .

Elevance Health, carrying a Zacks Rank #2 (Buy), reported third-quarter 2022 adjusted EPS of $7.53, which beat the Zacks Consensus Estimate by 6.1%. Revenues of $39.63 billion outpaced the consensus mark by 1.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Elevance Health has an earnings yield of 5.5% against the industry’s (2.3%). ELV’s earnings surpassed estimates in all the trailing four quarters, the average being 4.1%.

Medpace Holdings, having a Zacks Rank #1, reported third-quarter 2022 adjusted EPS of $2.05, which beat the Zacks Consensus Estimate by 39.5%. Revenues of $384 million outpaced the consensus mark by 8.1%.

Medpace Holdings has an estimated growth rate of 22.7% for 2022. MEDP’s earnings surpassed estimates in the trailing four quarters, the average being 22.04%.

Accuray reported fourth-quarter fiscal 2022 adjusted loss per share of 4 cents, which surpassed the Zacks Consensus Estimate by 33.3%. Fourth-quarter revenues of $110 million outpaced the Zacks Consensus Estimate by 4.9%. It currently has a Zacks Rank #2.

Accuray has an estimated growth rate of 100% for fiscal 2023. ARAY’s earnings surpassed estimates in three of the trailing four quarters and lagged the same in one, the average surprise being 20.8%.