ECL – Market expectations are for Uniform ROA expansion, but management has concerns about margins, costs, and competition

• Ecolab Inc. (ECL:USA)currently trades near recent highs relative to UAFRS-based (Uniform) Earnings, with a 25.2x Uniform P/E, implying bullish expectations for the firm. However, management has concerns about margins, costs, and competition
• Specifically, management may lack confidence in the sustainability of organic sales growth at current levels, and may have concerns about their ability to reach mid-teens operating margin in their Energy segment if oil prices remain stable. Additionally, they may lack confidence in their ability to drive growth in their Healthcare segment through their recently completed initiatives, and may be concerned about their ability to offset increasing raw material costs with higher prices, particularly in their Energy and Water businesses. Furthermore, they may be concerned about increasing freight costs, and may have concerns about competitive pressures in their European Institutional business