ECL - Embedded Expectations Analysis - 2019 06 25
Ecolab Inc. (ECL:USA) currently trades at historical highs relative to UAFRS-based (Uniform) Earnings, with a 29.8x Uniform P/E, implying bullish expectations for the firm. However, management has concerns about margins in their Industrial, Energy, and Water segments, their pricing strategy, and the potential of the Circle the Customer initiative.Specifically, management may lack confidence in their ability to manage restructuring, freight, and SAP implementation costs, improve their Healthcare portfolio mix by shifting from products to programs, and drive margin expansion in their Industrial, Energy, and Water businesses. In addition, they may be exaggerating the success of pricing activity in their Energy and Industrial segments, the strength of their Water segment, and their QSR and FRS teams' ability to continue to secure new wins. Finally, management may be exaggerating their ability to drive top-line growth in the Energy segment, and their Circle the Customer initiative's ability to drive business wins and opportunities in their Food & Beverage and Pest segments.
Ecolab is a provider of water, hygiene and energy technologies and services. The company's segments include: Global Industrial, which provides water treatment and process applications, and cleaning and sanitizing solutions in the manufacturing, food and beverage processing, chemical, power generation, pharmaceutical and commercial laundry industries; Global Institutional, which provides cleaning and sanitizing products to the foodservice, hospitality, lodging, healthcare, government, education and retail industries; and Global Energy, which serves the process chemicals and water treatment needs of the global petroleum and petrochemical industries in both upstream and downstream applications.
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