Ecolab Inc. ECL is well-poised for growth, backed by a robust product portfolio and cost-efficiency program. However, segmental weakness raises concern.

The stock has gained 46.5% compared with the industry’s growth of 75.3% in a year’s time. Also, the S&P 500 Index has rallied 62.7% in the same time frame.

Ecolab — with a market capitalization of $61.51 billion — is a leading provider of water, hygiene, and energy technologies and services, which protect people and vital resources. It anticipates earnings growth of 10.9% for the next five years.

Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).

Factor Hurting the Stock

Segmental softness remains concerning for Ecolab. In fourth-quarter 2020, the company’s Global Industrial sales declined 1.9% year over year to $1.55 billion. A substantial decrease in Downstream sales and a decline in Water more than offset modest sales growth in Food & Beverage, and Paper.

Further, sales at the Global Institutional segment plunged 21.9% year over year to $881.4 million, owing to a steep decline in the Institutional business and a modest decrease in Specialty sales. With respect to the Other segment, sales fell 8.1% year over year to $282.9 million.

Key Catalysts

Ecolab boasts a robust product portfolio that continues to contribute to its long-term growth. This month, the company launched an improved version of its Smart Water Navigator. The free online tool is equipped to help businesses understand the value of water in their operations and take necessary action to attain corporate water goals.

In December 2020, the FDA granted Emergency Use Authorization to Ecolab’s Bioquell Technology System to decontaminate specific N95 respirators. The company’s decontamination technology aids in respirator reuse by healthcare personnel to help address shortages.

In the third quarter of 2020, Ecolab announced the expansion of the Ecolab Efficiency Initiative, which will generate $335 million of projected savings (up from the previously mentioned $270 million) by the end of 2022.

Additionally, in order to acknowledge evolving end markets in the Institutional business line and boost its capability in capturing market share, the company granted the Institutional Advancement program (the Institutional program) in the fourth quarter of 2020. The program is an advancement of improvements made throughout the past 18 months and is committed toward continued improvement of its sales and service model, while maintaining its focus on growth and excellent customer experience.

On the back of the combined effect of these two programs, Ecolab anticipates incurring costs of $335 million ($255 million after tax) through the end of 2023, with cumulative cost savings from the two programs projected to generate annual savings of $365 million by the end of 2024.

Estimates Trend

For 2021, the Zacks Consensus Estimate for revenues is pegged at $12.39 billion, indicating growth of 0.3% from the year-ago period’s reported figure. The same for adjusted earnings per share stands at $5.12, suggesting an improvement of 27.4% from the prior-year reported figure.

Stocks to Consider

Some better-ranked stocks from the broader medical space are Surmodics, Inc. SRDX, IDEXX Laboratories, Inc. IDXX and Cantel Medical Corp. CMD, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Surmodics’ long-term earnings growth rate is estimated at 10%.

IDEXX’s long-term earnings growth rate is estimated at 15.8%.

Cantel Medical’s long-term earnings growth rate is estimated at 19%.

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