Ecolab (ECL) Tops Q1 EPS by 7c, Revenues Beat

Ecolab (NYSE: ECL) reported Q1 EPS of $1.13, $0.07 better than the analyst estimate of $1.06. Revenue for the quarter came in at $3.58 billion versus the consensus estimate of $3.5 billion.

FIRST QUARTER HIGHLIGHTS:

• Reported diluted EPS $0.97, -4%.
• Adjusted diluted EPS $1.13, +10%, excluding special gains and charges and discrete tax items.
• Reported sales +2%. Acquisition adjusted fixed currency sales also +2% as good growth in the Institutional and Healthcare & Life Sciences segments more than offset a 3% decline in Upstream Energy. Excluding the Upstream Energy business, acquisition adjusted fixed currency sales were +3%.
• Reported operating income +8%. Adjusted operating income +12% as pricing, improved volume growth and cost saving initiatives more than offset investments in the business and other selling related expenses during the quarter.

CEO comment

Commenting on the quarter, Douglas M. Baker, Jr., Ecolab’s chairman and chief executive officer said, “Our strong first quarter results reflect solid underlying business trends and modest COVID-19 impacts – a slightly unfavorable impact on sales and modest benefit to earnings from cost controls.

“Our company and business are in good shape, and our team is doing an incredible job stepping up to help our customers, communities and teams manage through the pandemic. We have businesses with increased demand (including Food & Beverage, Healthcare, Food Retail, Life Sciences) and those with much less demand near term (including the Institutional business and Pest Elimination). We expect the major COVID-19 impacts will be felt over the next few quarters and will be net unfavorable on both our top and bottom lines for the year. Our second quarter will likely see the largest sales impact as we realize both lower consumption, particularly in our restaurant and hotel segments, and channel destocking. These factors remain very fluid, and as a consequence, we are unable to reliably model our sales and therefore we will not be providing earnings forecasts.

“With that said, we believe we are in a very strong position to ‘weather the storm’ and simultaneously strengthen our businesses for what comes next. We expect to generate positive cash flow throughout the year, and we have a large cash reserve and strong balance sheet as additional backstops. While we have certainly taken strong cost control measures, we are at the same time accelerating our investments in digital connectivity and artificial intelligence capabilities, as well as new hygiene technologies – areas that will be even more important during and after COVID-19.

“We are confident we will emerge from the current crisis a better and stronger company, just as we have following prior global crises. While 2020 will be a year of unprecedented disruptions, our mission – to make the world cleaner, safer and healthier – will be even more important to our customers and society going forward. We are focused on building our long-term fundamental strengths and opportunities, and the superior long-term value those create for our customers, company and our shareholders.”

Business Outlook

As earlier communicated, the uncertain outlook regarding the full extent of the pandemic’s impact on the global economy and its longevity do not provide an adequate basis for us to provide either quarterly or annual earnings forecasts, so our forward earnings guidance remains suspended.

While we expect 2020 Healthcare & Life Sciences segment sales to improve over the prior year, we expect modest pressure on our Industrial segment businesses and more significant pressure on sales of our Institutional and Other segments, with the pandemic’s impact on restaurant, hospitality and entertainment to result in a significant decline for the Institutional division within the Institutional segment and Pest Elimination for the year, and more significantly in the second quarter. We expect our second quarter will see the most significant impact from COVID-19 effects, and we expect a gradual improvement from those levels in the second half as the markets begin to recover and their demand for cleaning and sanitizing remains above normal.

For earnings history and earnings-related data on Ecolab (ECL) click here.

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