Ecolab (NYSE: ECL) reported Q3 EPS of $1.53, $0.01 worse than the analyst estimate of $1.54. Revenue for the quarter came in at $3.75 billion versus the consensus estimate of $3.74 billion.

• Reported diluted EPS $1.48, +10%.
• Adjusted diluted EPS $1.53, +11%, excluding special gains and charges and discrete tax items.
• Reported sales +5%. Acquisition adjusted fixed currency sales +7% with solid growth in all segments.
• Strong sales gains, pricing, new product innovation and cost savings more than offset higher delivered product costs and investments in the business. Lower taxes also benefited the adjusted EPS gain.
• 2018 adjusted diluted EPS forecast reduced to $5.20 to $5.30, +11% to 13%, as raw material and foreign exchange impacts are expected to be $0.15 per share worse than forecasted in our last earnings release.

CEO comment

Commenting on the quarter, Douglas M. Baker, Jr., Ecolab’s chairman and chief executive officer said, “We delivered a solid third quarter, with 7% acquisition adjusted sales growth and accelerating pricing which more than offset higher than expected delivered product costs and unfavorable foreign exchange impacts.

“Our volume, pricing and cost savings continue to be strong, however raw material input costs and foreign exchange impacts will be higher than previously forecast for the balance of 2018. Ultimately, continued sales and cost savings execution will overtake the delivered product cost inflation pressure. This is already occurring as evidenced by our accelerating operating income growth through the year, and we expect the improvement to continue moving forward. However, the pace of our margin recovery has been impacted by higher raw material and transportation inflation, along with unfavorable foreign exchange, which are more significant than forecasted. Combined, these impacts total $0.75 per share in headwinds versus our original 2018 expectations, and are $0.15 per share higher than we forecast in our last quarter’s release. While a challenge for 2018, given the limited time remaining for us to offset them, we do not view this as problematic for the medium or long term as we continue to focus on strong pricing, volume and cost savings execution.

“We are clear about what needs to be done both over the near and long term. And while we will continue to drive volume, pricing and cost savings, we are also making the necessary investments in our technology backbone, digital tools and core innovation for the future. Our large market opportunities, competitive advantages and excellent team remain continued strengths which are the underpinnings for both our optimism and ability to drive growth this year and for the future.”

GUIDANCE:

Ecolab sees FY2018 EPS of $5.20-$5.30, versus the consensus of $5.36.

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