J.P Morgan Comments On Ecolab Following Earnings Reprot

J.P Morgan says it is unlikely, that one could, arrive at a purchase decision in favor of Ecolab ECL shares, if one judged the company simply by its reported 4Q:10 income statement numbers. The income statement, at first sight, indicates that sales growth stalled, that pro forma earnings numbers for 2011 and 2012 are in a sense overstated because of meaningful European restructuring charges, that 1Q:11 earnings growth is minimal, and that the company is disinclined to repurchase its shares, despite its relatively low value by historical metrics. The European restructuring is to cost $150M pre-tax and $125M after-tax through 2013. Ecolab estimates that half the charge should be cash and half noncash. J.P Morgan expects the cash portion to be somewhat larger than half, given that ECL plans to sever 900 people and to close European infrastructure. The restructuring costs are weighted to 2011 and should total $0.25 per share this year. According to J.P Morgan this seems a reasonable moment to build a position in Ecolab shares. ECL was a poor share price performer in 2010 and has been at the bottom of the chemical universe thus far this year. J.P Morgan has a $54 PT and Overweight rating on ECL ECL closed Thursday at $47.12