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Clean Harbors Benefits From Buyouts & Operational Efficiency

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Shares of Clean Harbors, Inc. (CLH - Free Report) have gained 45.0% so far this year, outperforming the 16.5% rise of the industry it belongs to and 15% rise of the Zacks S&P 500 composite.

 

The company reported strong fourth-quarter 2018 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings per share came in at 24 cents against a loss of 6 cents in the year-ago quarter. Earnings beat the consensus estimate by 9 cents.Total revenues of $858.20 million outpaced the consensus mark by $39.5 million and increased 14.8% year over year.

Clean Harbors has an impressive earnings surprise history, having outpaced estimates in each of the last four quarters. It delivered average four-quarter positive earnings surprise of 49.6%.

What’s Driving Clean Harbors?

Acquisitions have been helping Clean Harbors expand its business across multiple lines of services and contributing to its top-line growth. In 2018, the company completed two acquisitions — a privately-owned company in August and the U.S. Industrial Cleaning Business of Veolia Environmental Services North America LLC (the "Veolia Business") in February. While the privately-owned company expanded Clean Harbors’ environmental services and waste oil capabilities, Veolia boosted the company’s U.S. Industrial Services business.The company recorded $154 million of direct revenues from the Veolia Business in 2018.

Clean Harbors’ focus on improving its efficiency and lowering operating costs through advanced technology, process efficiencies and stringent cost management are appreciable. By setting-up additional service locations near treatment, storage and disposal facilities (TSDFs), it expects to minimize capital expenditure and increase its market share. This, in turn, is likely to drive additional waste into the company’s existing facilities, thereby, increasing capacity utilization and enhancing operating profit.

Further, the company continues to make capital investments to enhance its quality and comply with government and local regulations. The company’s diversified customer base — ranging from Fortune 500 companies to midsize and small public and private entities — provides it with a stable and recurring sources of revenues.

Zacks Rank & Other Stocks to Consider

Currently, Clean Harbors sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

A few other top-ranked stocks in the broader Zacks Business Services sector are Insperity (NSP - Free Report) , MAXIMUS (MMS - Free Report) and Automatic Data Processing (ADP - Free Report) . While Insperity sports a Zacks Rank #1, MAXIMUS and Automatic Data Processing carry a Zacks Rank #2 (Buy). Long-term expected EPS (three to five years) growth rate for Insperity, MAXIMUSand Automatic Data Processing is 18%, 10% and 13%, respectively.

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