Barclays Sees Long-Term EPS Growth For Ecolab

Barclays commented on Ecolab Inc. (NYSE: ECL) Friday and maintained an Overweight rating while cutting its price target from $124 to $120.

Analyst Manav Patnaik lowered the FY 2015 “estimates for ECL's Energy segment (30 percent of company) from 10.5 percent to a "worst case" 3-4 percent scenario (but recover to HSD thereafter; in-line with the HSD growth ECL talked about with oil at the $70-75 level).”

Patnaik noted that in “a 'lower for longer' oil environment, we expect the impact on the bottom line to be mitigated by a) moving Energy from 'full-on growth' mode to 'growth + cost savings initiatives'; b) gas/diesel (albeit costs are <5 percent of sales) and generally lower raw material costs (likely a notable % of COGS); and c) more disposable income for consumers to spend on restaurants and travel (supporting Institutional, F&B, Specialty), and general consumption (re: Water business).”

According to Patnaik, the company should be able to push its long-term EPS growth to 15 percent which “should support step-ups in 1) buybacks - capacity for more than the $500M in FY14 that we have forecasted; and 2) tuck-in M&A (even in Energy should valuations come in?) - which adds ~2-3 percent to ECL's LT growth algorithm (7-12x TTM EBITDA, 1-2x sales).”

Ecolab recently traded at $101.89, down 0.71 percent.