Ecolab Preannounces Q2 Shortfall

Deutsche Bank analysts provided their views on Ecolab Inc. (NYSE:ECL) following the company’s preannounced Q2 shortfall, expecting earnings 8% below the Street estimates.
The driver of this shortfall is higher-than-expected raw material costs with delivered product costs now expected to be up 30% and more in Q2, compared to the previous expectation of up 30% year-over-year.
While the company has implemented a temporary energy surcharge of 8-12% to help deal with this unprecedented cost inflation, with only 1-plus month of the full surcharge benefit as it builds through the quarter but 3 full months of incremental energy costs, even with structural pricing (up an estimated 6-7%) and continued strong double-digit organic sales growth, Q2 earnings will fall below expectations. As a result, the company now views Q2 as a “transition” quarter as the surcharge gets implemented.

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