Stock (Symbol)

Ecolab (ECL)

Stock Price

$110

Sector

Food & Necessities

Data is as of

March 24, 2016

Expected to Report

Apr 26 – May 2

Company Description

Ecolab Inc. provides water, hygiene and energy technologies and services. Operating segments include Global Industrial, Global Institutional, Global Energy and Other. The Company’s Global Industrial segment consists of the Water, Food and Beverage, Paper and Textile Care operating units. Global Institutional segment consists of the Institutional, Specialty and Healthcare operating units. The Global Energy segment provides on-site, technology-driven solutions to the global drilling, oil and gas production, refining, and petrochemical industries. Other segment consists of the pest elimination and equipment care operating units. The Company’s cleaning and sanitizing programs and products, pest elimination services and equipment maintenance and repair services support customers in the food service, food & beverage processing, hospitality, healthcare, Government & education, retail, textile care & commercial facilities in 170 countries. Source: Thomson Financial

Sharek’s Take

Ecolab (ECL) could be turning a corner here, as the issues plaguing the stock might be going away. Ecolab was working against a retracting Energy market (30% of sales) in addition to a strong dollar (Intl is 50% of sales). Now my research shows the dollar issue going away at the end of Q2, with the lower dollar perhaps benefiting companies afterwards. Oil has also rallied, and ECL was hurt by drillers going offline in the U.S and Canada. Yesterday Oil broke out to $42 and the drillers are set to drill again with prices over $40. Ecolab was founded in 1923 as Economics Laboratory. Its 1st product was Absorbit which cleaned carpets on the spot and eliminated the need for hotels to be shut down to be cleaned. The company went public in 1957 then changed its name to Ecolab in 1986, and has increased its dividend each year since. Over the years Ecolab expanded exponentially and now serves the following industries: (1) Food and beverage manufacturing plants, (2) Water purifying plants, (3) Housekeeping, (4) Food retailers & supermarkets, (5) Hospitals & healthcare facilities, (6) Power plants & oil refineries and (7) Pest elimination. The company has 1500 scientists and 6000 patents who continue to innovate and create new and better products to offer. ECL just slashed estimates last qtr, but this could be the turning point. Last qtr the company had 2% profit growth, which was 13% without F/X. ECL is a quality stock. When I read its annual reports, the company shows ten years of financial data and all the numbers match the ones I got from other sources — clean financials just like its products. Bill Gates even owns 10% of its shares.

One Year Chart

Last qtr Ecolab would have had 13% profit growth if it wasn’t for currency. AND the company had a shutdown in some of its oil business. AND since the dollar was high it made its goods more expensive overseas (unless ECL cut margins). What I’m seeing is an Estimated Long Term Growth Rate of 12%. Now the P/E of 25 is high, but the company just had 2016 profit estimates fall from $5.18 to $4.84 and $4.47 the past few qtrs. Now, if this is the bottom, maybe estimates jump next qtr?

Fair Value

Although ECL is a low-single digit grower, it regularly has a P/E in the 20s. That’s a sign of a good stock, a sign smart money is aboard. My Fair Values are low, but those will increase if profit estimates do.

Bottom Line

Ecolab is a clean company, both within its business and with its financials, and is the type of buy-and-hold stock I want my mom in. Still, the stock is prone to long periods of no-growth and this could be one of them. I feel conditions are improving, and profit estimates could rise. Still, right now the numbers don’t look great thus the stock is ranked just 30th of 34 stocks in the Conservative Portfolio Power Rankings.