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Ecolab Inc ECL

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Morningstar’s Analysis

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Ecolab's Institutional Business Shows Solid Recovery in Second-Quarter Results; Shares Fairly Valued

Seth Goldstein, CFA Senior Equity Analyst

Analyst Note

| Seth Goldstein, CFA |

Ecolab's second-quarter results were in line with our expectation for the cadence of the year as operating income more than doubled versus the prior-year quarter and was up 50% versus the first quarter. The bulk of the growth was due to a recovery in the institutional business, which primarily sells products and services to the hospitality industry. We had expected Ecolab would see sequentially rising sales and profits, particularly in the institutional segment, as COVID-19-related restrictions ease and consumers return to dining at restaurants and staying in hotels. With our outlook largely unchanged, we've raised our fair value estimate to $202 per share from $200 as the time value of money effects are partially offset by our outlook for a higher U.S. corporate tax rate. Our wide moat rating is unchanged. At current prices, we view Ecolab shares as fairly valued on a risk-adjusted basis, with the stock trading a little less than 10% above our fair value estimate but still in 3-star territory.

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Company Profile

Business Description

Ecolab produces and markets cleaning and sanitation products for the hospitality, healthcare, and industrial markets. The firm is the global market share leader in this category with a wide array of products and services, including dish and laundry washing systems, pest control, and infection control products. The company has a strong hold on the U.S. market and is looking to increase its profitability abroad. Additionally, Ecolab serves customers in water, manufacturing, and life sciences end markets, selling customized solutions.

1 Ecolab Place
Saint Paul, MN, 55102
T +1 800 232-6522
Sector Basic Materials
Industry Specialty Chemicals
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 44,000