Ecolab reported 1Q 2010 earnings this morning. EPS was $0.40, up 67% quarter over quarter. This exceeded the top of Ecolab’s forecasted range. Net income attributable to shareholders increased 66% to $96 million. Adjusted EPS forecast for the year was raised to $2.21-2.26. Previous forecast was $2.17-2.25. My model has them earning $2.22 in 2010.
Sales were up 6% to $1.4 billion. They saw strong sales growth from Kay, Asia Pacific, Canada, and Latin America, along with cost savings actions and favorable delivered product costs.
Segments US Cleaning and Sanitizing and US Other Services operating income both rose 11% while International Operations operating income rose 81%.
Ecolab reacquired 3.3 million shares of its common stock during the first quarter under its share repurchase program.
Commenting on the quarter, Douglas M. Baker, Jr., Ecolab's Chairman, President and Chief Executive Officer said, "We are off to a good start in 2010. We once again outperformed our end markets, and through our aggressive sales efforts, cost savings and efficiency actions, we turned in a strong earnings gain that exceeded the top end of our forecasted range.
"We are confident in our prospects for 2010. Our markets are generally showing expected improvement from 2009's difficult environment, and we are stepping up our investments to drive growth within them. These investments include expanding our sales and service force, developing new innovative products and programs that provide better results and lower operating costs for customers, building infrastructure in key geographies to enable faster and more efficient growth and profitability, and looking at new ways to better serve our strong customer base. We are seeing returns from these investments today and expect much more as they progress, providing not only strong results in 2010 but positioning us for even better results in the years ahead. We believe we are in solid shape for the year, we continue to make progress on our long term growth initiatives, and we expect to continue delivering superior results for shareholders in 2010 and beyond."
Going forward, Ecolab expects 2nd quarter 2010 EPS of $0.54-0.57 with a gross margin of 50% and tax rate of 30-31%. My model remains unchanged at a price target of $52. The company is doing well, but based on the current price of $47.13 (down 1% in reaction to a market correction), there is only 10% upside. If opportunities arise for a company with more upside, I would be supportive of selling in order to free up cash.