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Why Is Ecolab (ECL) Up 1.5% Since the Last Earnings Report?

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About a month has gone by since the last earnings report for Ecolab Inc. (ECL - Free Report) . Shares have added about 1.5% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback?  Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Ecolab Beats Earnings and Revenue Estimates in Q2

Ecolab reported second-quarter 2017 adjusted earnings (excluding special gains, charges and tax items) of $1.13 per share, which came above the Zacks Consensus Estimate of $1.12. Earnings improved from $1.08 reported in the year-ago quarter.

Adjusted quarterly net sales were $3.46 billion, up 4% from the year-ago period. Also, net sales came above the Zacks Consensus Estimate of $3.40 billion. The upside came from new business gains, better pricing, product innovation and cost efficiencies. This more than offset higher delivered product costs.

Quarter Details

Global Industrial segment’s sales grew 3% year over year to almost $1.21 billion at fixed currency. This was driven by major gains in Paper, with modest increases in Food & Beverage and Water. North America and Latin America led the Global Industrial regional growth. Acquisition-adjusted fixed currency operating income decreased 4% due to higher delivered product costs.

Global Institutional segment sales increased 3% to $1.22 billion, led by strong growth in the Specialty and Healthcare business lines. Acquisition-adjusted fixed currency operating income increased 3% as pricing and sales volume gains more than offset innovation cum customer investments and higher delivered product costs.

Global Energy segment sales increased 5% to $792.4 million owing to strong growth in the well stimulation business and modest gains in the downstream business. Acquisition-adjusted fixed currency operating income decreased 4% due to higher delivered product costs and lower pricing.

Sales from the Other segment climbed 6% year over year to $215.3 million on account of strong growth in Pest Elimination business. Sales in this segment witnessed robust growth in North America. Fixed currency operating income fell 3% as pricing and sales volume gains were offset by higher field investments.

Outlook

For the third quarter of 2017, Ecolab projects adjusted diluted earnings per share in the range of $1.36–$1.44, compared with $1.28 a year ago.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. There has been one revision higher for the current quarter compared to four lower. While looking back an additional 30 days, we can see even more downside. There have been five moves lower in the last two months.

Ecolab Inc. Price and Consensus

VGM Scores

At this time, Ecolab's stock has a subpar Growth Score of D. However, its Momentum is doing a bit better with a C. The stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for momentum investors based on our style scores.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.


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