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Reasons Why Clean Harbors (CLH) Should be Retained For Now
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Clean Harbors, Inc. (CLH - Free Report) focuses on improving its efficiency and lowering operating costs through enhanced technology, process efficiencies and stringent cost management. Acquisitions help Clean Harbors expand its business across multiple lines of services. International presence exposes the company to risks associated with foreign exchange rates.
The stock has gained 40.2% in the year-to-date period compared with its industry's 9.8% increase in the same time frame.
Clean Harbors recently unveiled vision 2027 at its investor conference. The company presented two growth scenarios for the next five years. The first scenario emphasizes organic growth, projecting 2027 adjusted EBITDA of roughly $1.4 billion and adjusted free cash flow of approximately $600 million.
In the second scenario, which involves a combination of organic growth and acquisitions, the company envisions 2027 adjusted EBITDA of around $2.0 billion and adjusted free cash flow of about $800 million. The second model assumes the maintenance of a net debt leverage of approximately 2.0X through a combination of cash and debt for acquisitions. Both scenarios are based on the expectation of revenue growth in the range of 100-300 basis points above U.S. GDP and adjusted EBITDA growth of 200-300 basis points above revenue growth.
Clean Harbors is actively enhancing efficiency and reducing operating costs by leveraging advanced technology, process optimizations and rigorous cost management. The company has internalized maintenance costs, improved procurement and supply-chain processes, and consolidated sites to boost efficiency. Strategic investments in businesses, especially those near treatment, storage and disposal facilities, are anticipated to increase productivity, minimize capital expenditures and expand market share. This approach is expected to drive more waste to existing facilities, optimize capacity utilization and ultimately boost overall profitability.
The company is following a diligent acquisition strategy, which expands the its segments and thereby contributes to the performance. In March 2023, Clean Harbors acquired Thompson Industrial Services, LLC. The acquisition expands the Environmental Services segment's industrial operations in southeastern U.S. The preliminary purchase price allocation is provisional and subject to adjustments based on ongoing valuation updates.
Risks
Clean Harbors is exposed to foreign exchange risk, especially in Canada, where many manufacturing facilities and all lodging operations are based. Fluctuations in exchange rates, particularly with the Canadian dollar, can significantly impact the company's financial performance, thereby requiring effective risk management strategies.
The company’s current ratio at the end of third-quarter 2023 was pegged at 2, which is lower than 2.02 reported at the end of the previous quarter and 2.01 reported at the end of the year-ago quarter. Decreasing current ratio does not bode well.
CLH has a Zacks Rank #3 (Hold).
Stocks to Consider
Here are a few better-ranked stocks from the Business Services sector that may be considered
Gartner (IT - Free Report) : The Zacks Consensus Estimate of Gartner’s 2023 revenues indicates 7.9% growth from the year-ago figure while earnings are expected to decline 1.9%. The company has beaten the consensus estimate in all the past four quarters, with an average surprise of 34.4%.
FTI Consulting (FCN - Free Report) : The Zacks Consensus Estimate of FCN’s 2023 revenues indicates 12.1% growth from the year-ago figure while earnings are expected to grow 3.4%. The company has beaten the consensus estimate in three of the four quarters and missed on one instance, the average surprise being 8.5%.
FCN holds a Zacks Rank #2 (Buy).
Broadridge Financial Solutions (BR - Free Report) : The Zacks Consensus Estimate of Broadridge’s 2023 revenues indicates 7.7% growth from the year-ago figure while earnings are expected to grow 10.1%. The company has beaten the consensus estimate in three of the past four quarters and matched on one instance, the average surprise being 5.4%.
BR holds a Zacks Rank of 2.
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Reasons Why Clean Harbors (CLH) Should be Retained For Now
Clean Harbors, Inc. (CLH - Free Report) focuses on improving its efficiency and lowering operating costs through enhanced technology, process efficiencies and stringent cost management. Acquisitions help Clean Harbors expand its business across multiple lines of services. International presence exposes the company to risks associated with foreign exchange rates.
The stock has gained 40.2% in the year-to-date period compared with its industry's 9.8% increase in the same time frame.
Clean Harbors, Inc. Price
Clean Harbors, Inc. price | Clean Harbors, Inc. Quote
Factors in Favor
Clean Harbors recently unveiled vision 2027 at its investor conference. The company presented two growth scenarios for the next five years. The first scenario emphasizes organic growth, projecting 2027 adjusted EBITDA of roughly $1.4 billion and adjusted free cash flow of approximately $600 million.
In the second scenario, which involves a combination of organic growth and acquisitions, the company envisions 2027 adjusted EBITDA of around $2.0 billion and adjusted free cash flow of about $800 million. The second model assumes the maintenance of a net debt leverage of approximately 2.0X through a combination of cash and debt for acquisitions. Both scenarios are based on the expectation of revenue growth in the range of 100-300 basis points above U.S. GDP and adjusted EBITDA growth of 200-300 basis points above revenue growth.
Clean Harbors is actively enhancing efficiency and reducing operating costs by leveraging advanced technology, process optimizations and rigorous cost management. The company has internalized maintenance costs, improved procurement and supply-chain processes, and consolidated sites to boost efficiency. Strategic investments in businesses, especially those near treatment, storage and disposal facilities, are anticipated to increase productivity, minimize capital expenditures and expand market share. This approach is expected to drive more waste to existing facilities, optimize capacity utilization and ultimately boost overall profitability.
The company is following a diligent acquisition strategy, which expands the its segments and thereby contributes to the performance. In March 2023, Clean Harbors acquired Thompson Industrial Services, LLC. The acquisition expands the Environmental Services segment's industrial operations in southeastern U.S. The preliminary purchase price allocation is provisional and subject to adjustments based on ongoing valuation updates.
Risks
Clean Harbors is exposed to foreign exchange risk, especially in Canada, where many manufacturing facilities and all lodging operations are based. Fluctuations in exchange rates, particularly with the Canadian dollar, can significantly impact the company's financial performance, thereby requiring effective risk management strategies.
The company’s current ratio at the end of third-quarter 2023 was pegged at 2, which is lower than 2.02 reported at the end of the previous quarter and 2.01 reported at the end of the year-ago quarter. Decreasing current ratio does not bode well.
CLH has a Zacks Rank #3 (Hold).
Stocks to Consider
Here are a few better-ranked stocks from the Business Services sector that may be considered
Gartner (IT - Free Report) : The Zacks Consensus Estimate of Gartner’s 2023 revenues indicates 7.9% growth from the year-ago figure while earnings are expected to decline 1.9%. The company has beaten the consensus estimate in all the past four quarters, with an average surprise of 34.4%.
IT sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
FTI Consulting (FCN - Free Report) : The Zacks Consensus Estimate of FCN’s 2023 revenues indicates 12.1% growth from the year-ago figure while earnings are expected to grow 3.4%. The company has beaten the consensus estimate in three of the four quarters and missed on one instance, the average surprise being 8.5%.
FCN holds a Zacks Rank #2 (Buy).
Broadridge Financial Solutions (BR - Free Report) : The Zacks Consensus Estimate of Broadridge’s 2023 revenues indicates 7.7% growth from the year-ago figure while earnings are expected to grow 10.1%. The company has beaten the consensus estimate in three of the past four quarters and matched on one instance, the average surprise being 5.4%.
BR holds a Zacks Rank of 2.