Ecolab Earnings: Shares Plunge Due to Guidance Below Consensus, but Growth Remains Strong

Ecolab reported solid second-quarter results as operating income grew 36% versus the prior-year quarter, driven by higher prices and volumes and lower raw materials costs. The results were in line with our outlook for the year that Ecolab's strong pricing power and falling raw materials costs would drive solid double-digit profit growth. The results also confirm our view that Ecolab is poised for a full operating profit margin recovery. This recovery follows margin compression during the pandemic from lower volumes in the hospitality-focused institutional business and then the raw-materials inflation of the past couple of years. With our outlook largely unchanged, we are maintaining our $215 per share fair value estimate for Ecolab. Our wide-moat rating is also unchanged.