Maintaining $215 FVE Despite Ecolab's Tepid Q2 as Solid Long-Term Outlook Intact; Shares Undervalued

Ecolab's second-quarter results were in line with our view for the year that the company would continue to face cost inflation but see sequential improvement. During the quarter, revenue was up 13% year on year, but operating income was down 5% versus the prior-year quarter as higher costs weighed on profits. However, the 5% decline showed a sequential improvement versus the 14% decline during the first quarter. We expect continued sequential improvement throughout the year. We forecast the company will return to growth in 2023 as price increases take hold to offset cost inflation.