Ecolab Inc. (ECL Quick QuoteECL - Free Report) has been gaining from its solid product portfolio. The optimism, led by a solid third-quarter 2024 performance, along with cost efficiency measures, is expected to contribute further. However, macroeconomic concerns persist.

This Zacks Rank #3 (Hold) stock has rallied 20.4% in the past year against the industry’s 20.2% decline. The S&P 500 Composite has increased 27.3% during the same time frame.

The renowned water, hygiene and infection prevention solutions and services provider has a market capitalization of $68.2 billion. It projects 15% 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 0.79%.

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Reasons Favoring Ecolab’s Growth

Strong Product Portfolio: Ecolab is a global leader in water, hygiene, and infection prevention solutions, delivering comprehensive products, data-driven insights, and personalized services to enhance food safety, sustainability, and operational efficiency across more than 170 countries. Its offerings span food, healthcare, hospitality, and industrial markets, supporting clean and safe environments while optimizing water and energy use.

The company serves diverse sectors, including foodservice, healthcare, hospitality, and industrial processes, with cleaning, sanitizing, pest elimination, and water treatment solutions. Its Water business provides specialty products such as scale inhibitors, antifoulants, and advanced technologies like 3D TRASAR, integrating chemistry, remote monitoring, and control to deliver environmental and economic benefits.

Cost Efficiency Programs & Restructuring Activities: In August 2024, Ecolab announced the closure of the sale of its global surgical solutions business to Medline for $950 million in cash. The proceeds from this transaction are likely to enhance the company’s ability to invest in attractive growth opportunities and return capital to shareholders.

On July 30, 2024, Ecolab announced the One Ecolab initiative, which is likely to enhance its growth and margin expansion journey. As a program within this initiative, the company announced that it commenced a restructuring plan to leverage its digital technologies to realign the functional work done in many countries into global centers of excellence.

In November 2022, Ecolab’s management approved a Europe cost-savings program. In February 2023, the company expanded this program to focus on its Institutional and Healthcare businesses in other regions. The expanded program, The Combined Program, has delivered $167 million of cumulative cost savings with estimated annualized cost savings of $175 million in continuing operations by the end of 2024.

Strong Q3 Results: Ecolab’s solid third-quarter 2024 results buoy optimism. The company registered a robust year-over-year uptick in its bottom line and growth in its organic revenues. Revenue growth was driven by strong performance in the Institutional & Specialty and Industrial segments. Lower delivered product costs, value-based pricing and volume growth during the quarter were encouraging.

Per Ecolab, the completion of the sale of its global surgical solutions business marks a strategic shift for the company, enabling it to focus on its core competencies in infection prevention and instrument reprocessing. In the third quarter, ECL’s gross and operating margin expanded 230 and 250 basis points, respectively. This bodes well for the stock.

A Factor That May Offset ECL’s Gains

Macroeconomic Factors: Ecolab's international operations are significantly impacted by economic conditions, currency exchange rates, and political uncertainties. The company has restricted its Russian business to essential operations in healthcare, life sciences, food and beverage, and certain water services following the invasion of Ukraine and ongoing sanctions, with the potential for further reductions.

Economic instability in countries like Argentina and Turkey, or similar disruptions elsewhere, could negatively impact Ecolab's consolidated results by reducing local economic activity and weakening local currencies against the U.S. dollar, leading to decreased sales and earnings from foreign operations.

Estimate Trend

Ecolab is witnessing a stable estimate revision trend for 2024. In the past 60 days, the Zacks Consensus Estimate for its earnings has remained stable at $6.65 per share.

The Zacks Consensus Estimate for the company’s fourth-quarter 2024 revenues is pegged at $4 billion, indicating a 1.5% improvement from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Masimo (MASI Quick QuoteMASI - Free Report) , Accuray (ARAY Quick QuoteARAY - Free Report) and Abbott Laboratories (ABT Quick QuoteABT - Free Report) .

Masimo, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 11.8% for 2025. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.10%. Its shares have risen 31.7% against the industry’s 1% decline in the past six months.

Accuray, carrying a Zacks Rank #2 at present, has an estimated growth rate of 1200% for 2025. Its earnings missed estimates in three of the trailing four quarters and met in one, delivering an average negative surprise of 141.97%.

ARAY’s shares have gained 8.8% against the industry’s 1% decline in the past six months.

Abbott, carrying a Zacks Rank of 2 at present, has an estimated earnings growth rate of 10% for 2025. It delivered a trailing four-quarter average earnings surprise of 1.64%.

ABT’s shares have risen 8.5% in the past six months compared with the industry’s 7.2% growth.