Ecolab Earnings: Price Increases Drive Profit Growth and Margin Expansion

Ecolab reported strong fourth-quarter results as higher prices and lower costs drove a 48% year-on-year operating profit growth with over 400 basis points of operating margin expansion to 15%. The results exemplify our near-term thesis that the company would drive full profit recovery following the pandemic and subsequent cost inflation. First, we thought Ecolab's strong price power, which underpins our wide moat rating, would drive full profit recovery following cost inflation. Prices were up 5% year over year during the quarter as the company raised prices as contracts allowed. Second, we thought Ecolab's sales would hold up well even in an economic slowdown. Volumes were up 1% versus the prior-year quarter. We view this as a sign that customer demand for Ecolab's products, which are an essential part of operations, remains solid.