Ecolab Stock Down in Pre-Market Post Q2 Earnings Miss, Margins Expand

Core Insights - Ecolab Inc. reported second-quarter 2025 adjusted earnings per share (EPS) of $1.89, reflecting a year-over-year increase of 12.5%, but missed the Zacks Consensus Estimate by $0.01 [1][9] - Revenues for the quarter reached $4.03 billion, up 0.9% year over year, exceeding the Zacks Consensus Estimate by 0.4% [2][9] - The company experienced strong organic sales growth of 2.8%, driven by segments such as Institutional & Specialty, Pest Elimination, and Life Sciences [2][13] Revenue Details - Ecolab's total revenues were $4.03 billion, marking a 0.9% increase year over year, and organic sales were $3.88 billion, up 2.8% [2][9] - The Global Water segment reported fixed currency sales of $1.91 billion, reflecting a 2.4% growth year over year, with organic sales at $1.89 billion, up 1.7% [3] - The Global Institutional & Specialty segment saw fixed currency sales decline by 2.4% to $1.51 billion, while organic sales increased by 3.5% [4] - The Global Pest Elimination segment's fixed currency sales improved by 7.3% to $311.3 million, with organic sales up 6.2% [5] - The Global Life Sciences segment reported fixed currency and organic sales of $176.7 million, both reflecting a growth of 4.1% year over year [6] Margin Analysis - Gross profit for the quarter improved by 3.3% year over year to $1.80 billion, with a gross margin expansion of 100 basis points to 44.8% [7][9] - Selling, general and administrative expenses decreased by 0.7% to $1.07 billion year over year [7] - Adjusted operating profit totaled $734.7 million, a 9.8% increase from the prior year, with an adjusted operating margin expansion of 147 basis points to 18.3% [7][9] Financial Position - Ecolab ended the second quarter of 2025 with cash and cash equivalents of $1.92 billion, up from $1.16 million at the end of the first quarter [10] - Total debt increased to $8.21 billion from $7.61 billion at the end of the first quarter [10] - The company has a consistent dividend-paying history, with a five-year annualized dividend growth of 6.86% [10] Guidance - Ecolab provided an adjusted EPS outlook for the third quarter of 2025, expecting a range of $2.02 to $2.12, which represents a year-over-year increase of 10-16% [11] - For the full year 2025, the adjusted EPS is expected to be in the range of $7.42 to $7.62, reflecting a 12-15% increase from 2024 [12] Overall Assessment - Ecolab's second-quarter results showed better-than-expected revenues and solid year-over-year growth in both top and bottom lines, with strong performances across most segments [13] - The company benefited from share gains and strong value pricing, particularly in the Institutional & Specialty and Global Water segments [14] - However, the decline in reported revenues for the Global Institutional & Specialty segment due to the sale of the global surgical solutions business was a point of concern [15]