Here's Why You Should Retain Ecolab Stock in Your Portfolio Now

Ecolab Inc. ECL has been gaining from its solid product portfolio. The optimism, led by a solid fourth-quarter 2024 performance and continued focus on research and development, is expected to contribute further. However, macroeconomic concerns persist.

This Zacks Rank #3 (Hold) stock has lost 0.7% in the year-to-date period compared with the industry’s 5.1% decline. The S&P 500 Composite has decreased 10.8% during the same time frame.

The renowned water, hygiene and infection prevention solutions and services provider has a market capitalization of $67.4 billion. It projects 13.8% growth for the next five years and expects to maintain a strong performance in the future. Ecolab’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 0.91%.

Reasons Favoring Ecolab’s Growth

Ecolab’s Global High-Tech Business & Digital Platform: Ecolab’s Global High-Tech business and Ecolab Digital Platform are two key high-growth, high-margin engines driving the company's transformation. The Global High-Tech business, serving data centers and microelectronics industries, surpassed $300 million in annual sales with 20%+ operating margins, leveraging rising demand for liquid cooling systems amid AI-powered infrastructure growth.

Meanwhile, the Ecolab Digital Platform integrates IoT devices, AI software, and cloud analytics across 100,000+ customer systems, optimizing water usage, energy efficiency, and hygiene compliance while generating recurring revenue streams. Capturing over 120 billion data points in 2024, the platform enhances service productivity and margin expansion by enabling remote monitoring and predictive maintenance.

Strong Product Portfolio with Focus on R&D: Ecolab's broad range of offerings—including water treatment, hygiene, life sciences, digital technologies, and pest control—gives it a strong competitive edge, supported by ongoing R&D investments. The global water treatment systems market, worth $38.56 billion in 2023, is expected to expand at a CAGR of 8.1% through 2030, presenting substantial growth opportunities.

Ecolab’s cutting-edge solutions, such as the 3D TRASAR AI Dishmachine Program and the Ecolab 3D Cloud platform, integrate IoT and AI to enhance efficiency and performance. The company’s acquisition of Purolite has strengthened its ultra-purification portfolio, catering to increasing needs in biopharma and gene therapy production. With a focus on innovation and a capital expenditure-driven growth strategy, Ecolab is well-positioned as a tech leader in lucrative, fast-growing markets.

Strong Q4 Results: Ecolab’s solid fourth-quarter 2024 results buoy optimism. The company registered a robust year-over-year uptick in its top and bottom lines, along with solid performances across most of its segments. The expansion of both margins bodes well for the stock.

Per management, growth in the United States (ECL’s largest and most profitable region) continued to be strong, and growth across the rest of the world was also solid as the company was able to offset uneven macroeconomic trends. This looked promising for the stock. In the fourth quarter, ECL’s gross and operating margin expanded 135 and 141 basis points, respectively. This bodes well for the stock.

A Factor That May Offset ECL’s Gains

Macroeconomic Factors: Ecolab's operations across 170 countries expose it to geopolitical, economic, and currency-related risks. The company limited its Russian business to essential life-supporting operations amid the Ukraine conflict, impacting revenue and potentially scaling back further based on future developments. Past disruptions like the COVID-19 pandemic, supply-chain challenges, inflation, and high interest rates have also pressured profitability. In 2025, currency translation is expected to reduce reported sales by 3% and adjusted earnings per share (EPS) by 4%, posing a headwind that could disproportionately affect margins in lower-profit international markets despite improvements in core business performance.

Estimate Trend

Ecolab is witnessing a positive estimate revision trend for 2025. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved 18 cents north to $7.54 per share.

The Zacks Consensus Estimate for the company’s first-quarter 2025 revenues is pegged at $3.7 billion, indicating a 1.4% decline from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks from the broader medical space are AngioDynamics ANGO, Veeva Systems VEEV and Masimo MASI.

AngioDynamics, currently sporting a Zacks Rank #1 (Strong Buy), reported third-quarter fiscal 2025 adjusted EPS of 3 cents against the Zacks Consensus Estimate of a loss of 13 cents. Revenues of $72 million beat the Zacks Consensus Estimate by 2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

ANGO has an estimated fiscal 2026 earnings growth rate of 27.8% compared with the S&P 500 Composite’s 10.5% growth. The company surpassed earnings estimates in each of the trailing four quarters, with the average surprise being 70.9%.

Veeva Systems, sporting a Zacks Rank #1 at present, posted fourth-quarter fiscal 2025 adjusted EPS of $1.75, exceeding the Zacks Consensus Estimate by 10.1%. Revenues of $720.9 million surpassed the Zacks Consensus Estimate by 3.2%.

VEEV has an estimated long-term earnings growth rate of 26.6% compared with the industry’s 20.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 7.9%.

Masimo, currently sporting a Zacks Rank #1, reported a fourth-quarter 2024 adjusted EPS of $1.80, which surpassed the Zacks Consensus Estimate by 20.8%. Revenues of $600.7 million topped the Zacks Consensus Estimate by 0.8%.

MASI has an estimated earnings yield of 3.5% for fiscal 2025 against the industry’s 3.6% yield. The company’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 14.4%.

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This article originally published on Zacks Investment Research (zacks.com).

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