Ecolab Inc. Earnings: Margins Shrink Again, Net Income Falls

Rising costs hurt S&P 500 (NYSE:SPY) component Ecolab Inc. (NYSE:ECL) in the first quarter as profit dropped from a year earlier. Ecolab develops and markets cleaning and sanitizing products and programs, pest elimination, maintenance, and repair services for the hospitality, foodservice, healthcare and industrial markets.

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Ecolab Earnings Cheat Sheet for the First Quarter

Results: Net income for Ecolab Inc. fell to $49.7 million (17 cents per share) vs. $93.6 million (40 cents per share) a year earlier. This is a decline of 46.9% from the year-earlier quarter.

Revenue: Rose 85.1% to $2.81 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Ecolab Inc. reported adjusted net income of 50 cents per share. By that measure, the company beat the mean estimate of 48 cents per share. It beat the average revenue estimate of $2.72 billion.

Quoting Management: Douglas M. Baker, Jr., Ecolab’s Chairman and Chief Executive Officer said, “The ‘new’ Ecolab is off to an excellent start. Our team did a great job successfully managing the business and simultaneously made great progress against our integration and synergy objectives, exceeding both. Most impressively, our team also delivered record new business gains.”

Key Stats:

Last quarter was the fifth in a row that the company saw shrinking gross margins, as they fell 6.7 percentage points from the year-earlier quarter to 42.6%. In that span, margins have contracted an average of 2.6 percentage points per quarter on a year-over-year basis.

Revenue has risen for the last four quarters. Revenue increased 17.1% to $1.85 billion in the fourth quarter of the last fiscal year. The figure rose 11.2% in the third quarter of the last fiscal year from the year earlier and climbed 11.7% in the second quarter of the last fiscal year from the year-ago quarter.

The company beat estimates last quarter after being in line with expectations in the fourth quarter of the last fiscal year with net income of 70 cents per share.

Net income has dropped 19.1% year-over-year on average across the last five quarters. Performance was hurt by a 46.9% decline in the most recent quarter from the year-earlier quarter.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the second quarter has moved down from 74 cents a share to 73 cents over the last ninety days. For the fiscal year, the average estimate has been unchanged at $3.02 a share.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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