Ecolab, FLIR Systems, Zebra Technologies Are Back-to-Work Plays

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As the U.S. economy begins to reopen, more people will return to the factory and the office. Giving up elastic-waist pants will be hard enough, but acclimating to new work protocols could be even more daunting, especially in the absence of widespread vaccine protection against Covid-19.

The coming challenges could create opportunities for investors, however, as companies specializing in cleaning supplies, thermal scanners, and tracing technology find their products in growing demand.

Ecolab
(ticker: ECL), which sells sanitization products and services, has already seen its shares run up to lofty levels.
FLIR Systems
(FLIR), a specialist in temperature-sensing technologies, and
Zebra Technologies
(ZBRA), famed for its bar-code scanners, still look like good bets.

“There are new problems to solve,” says Himanshu Khurana, chief technology officer for
Honeywell’s
(HON) building-solutions business. He should know, because Honeywell supplies technology to about a quarter of the world’s nonresidential buildings. What’s more, the company already has noted heightened demand for cameras and temperature-monitoring systems, among other products.

Returning workers might expect to have their temperatures taken automatically as they enter buildings. Thermal scanners, such as those made by FLIR, can be run off tripods connected to laptops. More advanced systems can be integrated into buildings, employing artificial intelligence to make scanning less intrusive, and to help determine whether workers are wearing proper protective gear.

Workers should expect contact tracing, too. Zebra makes RFID, or radio frequency identification technology that already tracks industrial and retail assets. Now many types of businesses are asking Zebra for solutions to help minimize the risk of a severe outbreak if some workers become infected.

Ecolab is an industrial-cleaning play. But with many restaurants and other workplaces closed, the company could see earnings dip this year before rebounding to $5.80 a share in 2021, about in line with 2019 results. Yet the stock trades for 33 times earnings, a premium to its historic multiple. Baird analyst Andy Wittmann calls Ecolab a high-quality growth stock, but his price target is $171 a share, below Friday’s $194.75.

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FLIR trades at a more modest 19 times estimated 2021 earnings of $2.31 a share, also on par with 2019 results. The company reported $100 million in new, Covid-related bookings in the first quarter of 2020. That’s a lot for a company that posted $1.9 billion in total sales over the past twelve months. As thermal scanning expands, FLIR’s sales and valuation could grow.

Zebra could earn $13.71 a share next year, versus last year’s $12.94. “Location solutions…tracing contact, this will be a new business for us,” CEO Anders Gustafsson tells Barron’s. That adds to Zebra’s business momentum in its other franchises, including retail, health care, and transportation. Jeff Kessler of Imperial Capital rates Zebra the equivalent of Buy, citing its leadership in mission-critical areas. His price target: $250. Shares recently fetched $220.

Since a coronavirus vaccine won’t be ready for some time, people will have to adapt. That makes these three solid businesses even better.

Write to Al Root at [email protected]