Ecolab Undeterred By Falling Oil Prices, But Results ‘Fail To Impress’

CEO announces a $1 billion share repurchase program, indicates more acquisitions this year.

Ecolab Undeterred By Falling Oil Prices, But Results ‘Fail To Impress’
Ecolab Inc. saw a very modest gain in share prices early Tuesday on news that its energy chemicals business weathered the effects of plummeting oil prices to close fiscal 2014. But the company’s broader financial results underwhelmed analysts.
CEO Douglas Baker, Jr. also said Ecolab will launch a $1 billion share repurchase program and accelerate its acquisition pipeline this year. In recent years, the company has expanded with an $8.3 billion acquisition of Nalco, a water treatment provider, and a $2.2 billion acquisition of specialty chemicals company Champion Technologies, Inc.

The St. Paul-based water, hygiene, and energy technology company said fourth-quarter sales climbed 3 percent to $3.68 billion and that net income rose 17 percent to $335.5 million, or $1.10 per share. For the full year, Ecolab’s sales rose 8 percent to $14.3 billion and its net income climbed 24 percent to $1.2 billion, or $3.93 per share.
Ecolab’s earnings per share last quarter were in line with analysts’ expectations, but sales missed forecasts from analysts polled by Thomson Reuters ($3.72 billion) and estimates from Zacks Equity Research ($3.75 billion).
In a quarter marked by falling oil prices, Ecolab’s oil and gas chemical supply segment actually saw the biggest gains in sales among the company’s divisions: up 11 percent to $1.14 billion. In a news release, Baker said lower oil prices will slow the division’s growth but that he remained confident because of the strength of the segment’s business model. Further, the rest of Ecolab’s businesses stand to gain from lower raw material costs. “These factors should roughly offset each other, and we look for strong growth from operations before currency effects,” Baker said.
Looking ahead, Ecolab said it expects 2015 full-year adjusted earnings per share to rise to the $4.50 to $4.70 range, an 8 to 12 percent rise over the previous year. Analysts polled by Thomson Reuters expected per-share profit of $4.69. For the first quarter of 2015, Ecolab said it expects adjusted earnings per share in the $0.78 to $0.83 range, a 5 to 12 percent increase. Analysts, meanwhile, expected 86 cents.
Ecolab also expects foreign currency exchange rates to pose a challenge.
Zacks wrote Tuesday that the results failed to impress. “We believe aggressive competition from the likes of ServiceMaster (a Memphis-based commercial and residential cleaning service provider) will continue to hurt the company’s results, going forward. Moreover, challenging economic and market trends along with unfavorable internal issues will likely pose near-term headwinds.”
By mid-morning, Ecolab’s stock price was trading up around 1 percent at $112.49.
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