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Clean Harbors (CLH) Down 9.7% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Clean Harbors (CLH - Free Report) . Shares have lost about 9.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Clean Harbors due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Clean Harbors Beats Q2 Earnings & Revenue Estimates

Clean Harbors reported better-than-expected second-quarter 2020 results.

Adjusted earnings per share of 52 cents outpaced the Zacks Consensus Estimate by more than 100% but declined 21.2% year over year. Total revenues of $710 million beat the consensus estimate by 5.8% but decreased 18.3% year over year despite solid growth across both its operating segments.

Revenues by Segment

Environmental Services revenues of $496.91 million decreased 11.8% year over year owing to coronavirus-related slowdowns across multiple lines of business, partly offset by incineration and decontamination work.

Safety-Kleen revenues of $214.56 million decreased 29.8% year over year owingto a slowdown in both the branch and the Safety-Kleen Oil businesses.

Profitability Performance

Adjusted EBITDA of $135.48 million decreased 9.6% year over year. Adjusted EBITDA margin increased 190 basis points (bps) year over year to 19.1%.

Adjusted EBITDA includes $23.4 million of assistance from government programs.

Segment wise, Environmental Services’ adjusted EBITDA was $138.08 million, up 17.2% year over year. The uptick was backed by cost-reduction efforts, strength in the company’s facilities, emergency-response revenues and the two government programs, which accounted for $13.3 million in this segment.

Safety-Kleen’s adjusted EBITDA of $46.59 million decreased 41.4% due to the lower revenues, pricing for Oil products and costs associated with the temporary shuttering of refineries, partly offset by cost-reduction efforts, and government-assistance programs.

Balance Sheet & Cash Flow

Clean Harbors exited second-quarter 2020 with cash and cash equivalents of $447.37 million compared with $432.21 million at the end of the prior quarter. Inventories and supplies were $219.81 million, up from $216.53 million in the prior quarter. Long-term debt was $1.63 billion compared with $1.70 billion in the prior quarter.

The company generated $139.81 million in cash from operating activities in the reported quarter. During the reported quarter, the company did not repurchase any of its shares.

2020 Guidance

Clean Harbors unveiled its 2020 guidance. The company expects adjusted EBITDA of $470-$500 million. Segment wise, adjusted EBITDA for Environmental Services is anticipated to be just slightly above 2019's level of $446 million. Safety-Kleen’s adjusted EBITDA is expected to decline nearly 20% from 2019’s $282 million.

Net income is anticipated to be $53-$84 million. Adjusted free cash flow is expected between $200 million and $230 million. Net cash from operating activities is projected between $355 million and $405 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 11.11% due to these changes.

VGM Scores

Currently, Clean Harbors has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Clean Harbors has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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