Company Reports

Ecolab reported strong first-quarter results as adjusted operating income grew 47% versus the prior-year quarter. The growth was driven by higher prices and volumes and lower product costs, which generated 400 basis points of operating margin expansion. The results exemplify our wide moat rating based on Ecolab's strong pricing power. We expect Ecolab's ability to generate revenue and profit growth through price increases will continue into the future, driving companywide margin expansion over the long term to the high-teens levels from 14% in 2023.

As the global leader in the cleaning and sanitation industry, Ecolab provides products that help its hospitality, food-service, and healthcare customers do laundry, wash dishes, and maintain regulatory compliance. With unmatched scale and a solid razor-and-blade business model, Ecolab's competitive advantages are firmly in place. The company's cleaning and sanitation scale dwarfs the competition. Ecolab generates over double the revenue of its largest rival. Its industries are fragmented, with many markets made up of regional and local competitors. Ecolab controls roughly 9% of the $152 billion global market. With its unrivaled scale and product portfolio, the company is an attractive partner to global hospitality, food-service, and manufacturing firms. We think it will continue to grow from market share gains and expansion into new end markets.

Ecolab reported strong fourth-quarter results as higher prices and lower costs drove a 48% year-on-year operating profit growth with over 400 basis points of operating margin expansion to 15%. The results exemplify our near-term thesis that the company would drive full profit recovery following the pandemic and subsequent cost inflation. First, we thought Ecolab's strong price power, which underpins our wide moat rating, would drive full profit recovery following cost inflation. Prices were up 5% year over year during the quarter as the company raised prices as contracts allowed. Second, we thought Ecolab's sales would hold up well even in an economic slowdown. Volumes were up 1% versus the prior-year quarter. We view this as a sign that customer demand for Ecolab's products, which are an essential part of operations, remains solid.

As the global leader in the cleaning and sanitation industry, Ecolab provides products that help its hospitality, food-service, and healthcare customers do laundry, wash dishes, and maintain regulatory compliance. With unmatched scale and a solid razor-and-blade business model, Ecolab's competitive advantages are firmly in place. The company's cleaning and sanitation scale dwarfs the competition. Ecolab generates over double the revenue of its largest rival. Its industries are fragmented, with many markets made up of regional and local competitors. Ecolab controls roughly 9% of the $152 billion global market. With its unrivaled scale and product portfolio, the company is an attractive partner to global hospitality, food-service, and manufacturing firms. We think it will continue to grow from market share gains and expansion into new end markets.

As the global leader in the cleaning and sanitation industry, Ecolab provides products that help its hospitality, food-service, and healthcare customers do laundry, wash dishes, and maintain regulatory compliance. With unmatched scale and a solid razor-and-blade business model, Ecolab's competitive advantages are firmly in place. The company's cleaning and sanitation scale dwarfs the competition. Ecolab generates over double the revenue of its largest rival. Its industries are fragmented, with many markets made up of regional and local competitors. Ecolab controls roughly 9% of the $152 billion global market. With its unrivaled scale and product portfolio, the company is an attractive partner to global hospitality, food-service, and manufacturing firms. We think it will continue to grow from market share gains and expansion into new markets.

Ecolab's third-quarter results exemplified our thesis that the company's strong pricing power, which underpins our wide moat rating, would drive profit recovery and margin expansion. Operating income grew 17% year on year driven by higher prices, stable volumes, and lower costs, with profit growth in all segments.

As the global leader in the cleaning and sanitation industry, Ecolab provides products that help its hospitality, food-service, and healthcare customers do laundry, wash dishes, and maintain regulatory compliance. With unmatched scale and a solid razor-and-blade business model, Ecolab's competitive advantages are firmly in place. The company's cleaning and sanitation scale dwarfs the competition. Ecolab generates over double the revenue of its largest rival. Its industries are fragmented, with many markets made up of regional and local competitors. Ecolab controls roughly 9% of the $152 billion global market. With its unrivaled scale and product portfolio, the company is an attractive partner to global hospitality, food-service, and manufacturing firms. We think it will continue to grow from market share gains and expansion into new markets.

We maintain our $210 per share fair value estimate for Ecolab following the company's investor day. Our wide moat rating is also unchanged.

Ecolab's second-quarter results exemplified our near- and long-term outlook for the business. Adjusted operating income was up 21% versus the prior-year quarter, including 130 basis points of margin expansion. This is consistent with our near-term view that the company's strong pricing power, which underpins our wide moat rating, would restore profit growth after cost inflation weighed on 2022 results.

As the global leader in the cleaning and sanitation industry, Ecolab provides products that help its hospitality, food-service, and healthcare customers do laundry, wash dishes, and maintain regulatory compliance. With unmatched scale and a solid razor-and-blade business model, Ecolab's competitive advantages are firmly in place. The company's cleaning and sanitation scale dwarfs the competition. Ecolab generates over double the revenue of its largest rival. Its industries are fragmented, with many markets made up of regional and local competitors. Ecolab controls roughly 9% of the $152 billion global market. With its unrivaled scale and product portfolio, the company is an attractive partner to global hospitality, food-service, and manufacturing firms. We think it will continue to grow from market share gains and expansion into new markets.

As the global leader in the cleaning and sanitation industry, Ecolab provides products that help its hospitality, food-service, and healthcare customers do laundry, wash dishes, and maintain regulatory compliance. With unmatched scale and a solid razor-and-blade business model, Ecolab's competitive advantages are firmly in place. The company's cleaning and sanitation scale dwarfs the competition. Ecolab generates over 3 times the revenue of its largest rival. Its industries are fragmented, with many markets made up of regional and local competitors. Ecolab controls roughly 8% of the $152 billion global market. With its unrivaled scale and product portfolio, the company is an attractive partner to global hospitality, food-service, and manufacturing firms. We think it will continue to grow from market share gains and expansion into new markets.

We maintain our $210 per share fair value estimate for Ecolab after incorporating the company's first-quarter results into our valuation model. Our wide moat rating is also unchanged.

After updating our model to incorporate Ecolab's fourth-quarter results, we maintain our $210 per share fair value estimate. During the quarter, Ecolab grew adjusted operating income 14% versus the prior-year quarter while continuing to make progress on its margin recovery versus the beginning of 2022. Management expects the growth will continue in 2023, guiding to first-quarter adjusted operating income growth of 15% to 25%.

As the global leader in the cleaning and sanitation industry, Ecolab provides products that help its hospitality, food-service, and healthcare customers do laundry, wash dishes, and maintain regulatory compliance. With unmatched scale and a solid razor-and-blade business model, Ecolab's competitive advantages are firmly in place. The company's cleaning and sanitation scale dwarfs the competition. Ecolab generates over 3 times the revenue of its largest rival. Its industries are fragmented, with many markets made up of regional and local competitors. Ecolab controls roughly 8% of the $152 billion global market. With its unrivaled scale and product portfolio, the company is an attractive partner to global hospitality, food-service, and manufacturing firms. We think it will continue to grow from market share gains and expansion into new markets.

We have trimmed our Ecolab fair value estimate to $210 per share from $215 following the company's third-quarter results as we reduced our near-term forecast. Our wide moat rating is unchanged. In our view, Ecolab's third-quarter results reflected progress in the company's goal to restore its profits amid the COVID-19 recovery and cost inflation. Operating income was up 4% year over year, as price increases offset cost inflation. More importantly, Ecolab swung to profit growth following three straight quarters of year-over-year operating profit declines due to cost inflation outpacing price increases. This exemplifies our wide moat rating, which is driven by Ecolab's pricing power as a result of the company's strong customer switching costs.

As the global leader in the cleaning and sanitation industry, Ecolab provides products that help its hospitality, food-service, and healthcare customers do laundry, wash dishes, and maintain regulatory compliance. With unmatched scale and a solid razor-and-blade business model, Ecolab's competitive advantages are firmly in place. The company's cleaning and sanitation scale dwarfs the competition. Ecolab generates over 3 times the revenue of its largest rival. Its industries are fragmented, with many markets made up of regional and local competitors. Ecolab controls roughly 8% of the $152 billion global market. With its unrivaled scale and breadth of product offerings, the company is an attractive partner to global hospitality, food-service, and manufacturing firms. We think it will continue to grow from market share gains and expansion into new markets.

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.

As the global leader in the cleaning and sanitation industry, Ecolab provides products that help its hospitality, food-service, and healthcare customers do laundry, wash dishes, and maintain regulatory compliance. With unmatched scale and a solid razor-and-blade business model, Ecolab's competitive advantages are firmly in place. The company's cleaning and sanitation scale dwarfs the competition. Ecolab generates over 3 times the revenue of its largest rival. Its industries are fragmented, with many markets made up of regional and local competitors. Ecolab controls roughly 8% of the $152 billion global market. With its unrivaled scale and breadth of product offerings, the company is an attractive partner to global hospitality, food-service, and manufacturing firms. We think it will continue to grow from market share gains and expanding into new markets.

Wide-moat Ecolab's shares have fallen over 30% from their 52-week high as the company's financials have been impacted by cost inflation and continued lower volumes due to the COVID-19 pandemic affecting dining and travel. However, we view these issues as fleeting and expect profits to recover and improve sequentially throughout 2022 and into 2023. At current prices, we view the stock as undervalued, trading in 4-star territory relative to our $215 fair value estimate, creating an opportunity for long-term investors to pick up shares of one of the highest quality specialty chemicals companies in our coverage.

As the global leader in the cleaning and sanitation industry, Ecolab provides products that help its hospitality, food-service, and healthcare customers do laundry, wash dishes, and maintain regulatory compliance. With unmatched scale and a solid razor-and-blade business model, Ecolab's competitive advantages are firmly in place. The company's cleaning and sanitation scale dwarfs the competition. Ecolab generates over 3 times the revenue of its largest rival. Its industries are fragmented, with many markets made up of regional and local competitors. Ecolab controls roughly 8% of the $152 billion global market. With its unrivaled scale and breadth of product offerings, the company is an attractive partner to global hospitality and food-service firms. We think it will continue to grow from market share gains and expanding into new markets.