Ecolab cleans up by keeping everything really clean

Posted Jan 29th 2008 11:50AM by Joseph Lazzaro
Filed under: Products and Services, Marketing and Advertising, Stocks to Buy

The market's choppy / consolidating pattern continues, suggesting the need for an additional defensive play or two (or perhaps more), and with this as a backdrop, Ecolab is worth a review.

Ecolab (NYSE: ECL) is a global supplier of cleaning, sanitizing, and maintenance products and services for the hospitality, institutional, and industrial markets.

Analysts expect the company's domestic institutional, Kay, food & beverage, health care, and pest elimination units to continue to expand. Revenue is expected to increase a healthy 10-13% in 2008.

Further, international sales should continue to be strong, with better-than-adequate margins. Overall costs remain reasonable, even with higher raw material costs. In short, it's a largely positive commercial landscape for ECL, bolstered by favorable international economic conditions. The Reuters F2007/F2008 EPS consensus estimates for Ecolab are $1.66/$1.90.

The risks? Ecolab remains vulnerable to unexpected slowdowns in the hospitality, travel, and food service sectors. Analysts also have their on those aforementioned raw material costs, and ECL's ability to launch successful new products.

The First Call mean rating for ECL is: Buy. [16 firms.] Mean 2008 target: $56.00. [high: $60, low: $51.]

Stock Analysis: Ecolab is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from ECL's shares. Sell / Stop Loss if you were to purchase shares in this company: $28.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Tags: cleaning, ECL, Ecolab, household products