Ecolab (ECL) Earnings Expected to Grow: Should You Buy?

The market is anticipating a significant increase in earnings for Ecolab (ECL) when the company reports its results for the quarter ending September 2024. This consensus outlook is an important indicator when evaluating the company's financial health, but what could really impact the stock price in the short term is whether the actual earnings exceed these expectations.

The earnings report is scheduled for release on October 29, 2024. If Ecolab's results align positively with these key figures, it could lead to a boost in the stock’s value. Conversely, missing the estimates may result in a decline.

While how management addresses business conditions during the earnings call will largely determine the sustainability of any price changes and future earnings expectations, it’s valuable to evaluate the likelihood of a positive surprise in earnings per share (EPS).

Zacks Consensus Estimate

Ecolab, a leader in cleaning, food safety, and pest control services, is expected to report quarterly earnings of $1.82 per share, reflecting a year-over-year increase of 18.2%. Additionally, revenues are projected to reach $4.02 billion, marking a 1.7% rise compared to the same quarter last year.

Estimate Revisions Trend

For the past month, the consensus EPS estimate for Ecolab has been adjusted upwards by 0.22%. This change indicates that analysts have collectively reassessed their forecasts for the company.

It’s important to remember that an overall change in expectations may not mirror the sentiment of each analyst covering the stock.

Earnings Whisper

Estimate modifications leading up to an announcement give insights into the business climate affecting the reported results. Our proprietary model, the Zacks Earnings ESP (Expected Surprise Prediction), hinges on this concept to provide forecasts.

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is updated more recently than the consensus figure, making it reflective of the latest analyst insights. Essentially, if analysts revise their estimates ahead of the earnings release, they often hold the most current information.

A positive Earnings ESP reading suggests the actual earnings could deviate favorably from the consensus estimate. This reading is particularly predictive of an earnings beat when paired with a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold). Research indicates that this combination results in a positive surprise nearly 70% of the time. Conversely, a negative Earnings ESP cannot reliably forecast an earnings miss.

How Have the Numbers Shaped Up for Ecolab?

For Ecolab, the Most Accurate Estimate is currently higher than the Zacks Consensus Estimate, which signals that analysts are optimistic about the company’s earnings outlook. This has yielded an Earnings ESP of +2.99%.

The stock is currently rated as a Zacks Rank #3 (Hold), suggesting that Ecolab is well-positioned to potentially surpass the consensus EPS estimate.

Does Earnings Surprise History Hold Any Clue?

Analysts often look at a company’s historical performance against consensus estimates to gauge future predictions. Evaluating Ecolab’s surprise history can offer valuable insights.

In its last quarter, Ecolab had anticipated earnings of $1.66 per share but exceeded that expectation with earnings of $1.68, delivering a positive surprise of +1.20%. Over the past four quarters, Ecolab has consistently beaten EPS estimates, which adds to the current optimistic outlook.

Bottom Line

While an earnings beat can be significant, it is not the sole determinant of stock price movement. Some stocks may decline despite reporting strong earnings due to other unforeseen factors, while others might surge even after missing expectations based on different catalysts.

That said, investing in stocks that are projected to exceed earnings expectations may enhance the chances of success. Checking a company's Earnings ESP and Zacks Rank before quarterly results can be beneficial. Utilize the Earnings ESP Filter to identify the most promising stocks for potential investment.

In conclusion, Ecolab appears to be a strong candidate for an earnings beat. However, investors should consider a range of factors before deciding whether to invest in the stock ahead of its earnings announcement.

Expected Results of an Industry Player

Element Solutions (ESI), another competitor in the Zacks Chemical - Specialty sector, is also due to report, with an estimated EPS of $0.38 for the September 2024 quarter, indicating a year-over-year increase of 5.6%. Their expected revenue is $618.75 million, reflecting a 3.3% growth from last year.

In contrast, the consensus EPS estimate for Element Solutions has seen a decline of 1.4% in revisions over the last month. Nevertheless, their Earnings ESP currently stands at 0.00%, suggesting an equal Most Accurate Estimate.

With a Zacks Rank of #5 (Strong Sell), Element Solutions faces challenges in predicting a consensus EPS beat. However, it’s worth noting that the company has outperformed EPS expectations in three of the last four quarters.

Stay informed about upcoming earnings announcements with the Zacks Earnings Calendar.

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