Stock (Symbol) |
Ecolab (ECL) |
Stock Price |
$125 |
Sector |
| Food & Necessities |
Data is as of |
| April 2, 2017 |
Expected to Report |
| 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) management expects strong profit growth in of 8% to 12% in 2017 as the Energy market goes from being a drag on profits to modestly accretive to profits. ECL had flat profit growth last year as profits were crimped by a slow Energy market (23% of sales) and foreign exchange, with around half the F/X cost from Venezuela’s devaluation. The currency headwind is easing, from 14% four qtrs ago to 2% last qtr. Also, operating income from Ecolab’s Energy division was up 45% from the 1st to the 2nd half of last year on similar sales. The company 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. It went public in 1957 then changed its name to Ecolab in 1986, and has increased its dividend each year since. The company has 6000 patents and 1500 scientists who continue to innovate, creating new and better products. Ecolab’s products serve 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. This is a quality, conservative stock with 90% recurring revenue and clean annual reports. Through 2015, ECL had grown profits 14% a year the prior 20 years — and management has a target 15% profit growth every year. Bill Gates even owns 10% of the shares. Analysts have an Est. LTG of 12% per year on the stock in addition to a 1% yield, but ECL does sell for a rich 26x earnings. I think this is a great buy-and-hold stock for conservative investors, but much of the good news ahead is already priced into the stock. |
One Year Chart |
 Last qtr profits grew just 2% and missed the 4% estimate as sales fell 2%. 2017 profit estimates declined this qtr from $4.92 to $4.79 and that’s the 4th decline in the last 4 qtrs. Qtrly Estimates call for profit growth of 5%, 6%, 11% and 14% the next 4 qtrs which would be accelerating growth. But the stock’s already at its highs high and trades for 26x earnings. The Est. LTG did increase from 11% to 12% since last qtr. |
Fair Value |
 Ecolab always seems to be overvalued, but with a string of record profit years like this it’s easy to see why. My Fair Value is 25x earnings which equates to $120 this year and $134 next year. The stock’s right in the middle of that range now. |
Bottom Line |
 Ecolab’s profit growth is expected to get back-on-track this year but with the stock selling at its highs, much of the good news seems to already be baked into the stock. Still, this is one of the safest stocks in the world with most of its revenues recurring and a dividend that’s been raised thirty years. I’m also a big fan of the Est. LTG of 12% per year in addition to a 1% yield. ECL is ranked 27th of 30 stocks in the Conservative Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 27 of 30 |
