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On Sep 9, Zacks Investment Research updated the research report on waste management services provider Clean Harbors, Inc. (CLH - Free Report) .
Headquartered in Massachusetts, Clean Harbors is a chief provider of environmental, energy and industrial services in North America. The company serves a wide array of customers, including Fortune 500 companies and government agencies. It provides a number of services such as end-to-end hazardous waste management, emergency spill response, industrial cleaning and maintenance, and recycling services.
After the acquisition of Safety-Kleen, Inc. in Dec 2012, Clean Harbors became the largest re-refiner and recycler of used oil in the world and the largest provider of parts cleaning and environmental services to commercial, industrial and automotive customers in North America. The company is currently concentrating on making strategic acquisitions to expand its business in the oil collection and refinery markets. Expansion of the existing services portfolio, especially in non-disposal services, is expected to generate incremental revenues in the future.
During the last reported quarter, the company completed a series of six acquisitions totaling approximately $175 million. The transactions augmented its presence on the West Coast and supported its North American renewable lubricants program. This included terminals, re-refineries, waste oil collection and blending/packaging capabilities, which are critical components to the success of the ‘closed loop’ initiative.
The company also plans to divest a subsidiary in the Industrial Services group for approximately $50 million. This non-core business generated approximately $55 million in revenues in 2015.
However, decline in fuel prices and new policies are rapidly transforming the American energy sector, while escalating wars in the Middle East and a nuclear deal with Iran are clouding the global oil picture. The company’s exploration, drilling activity and production are largely dependent on the operation of oil rigs, as well as global and North American oil prices. The recent oil price instability and future price uncertainties have resulted in lower activity levels which are negatively impacting the company’s business.
In addition, Clean Harbors’ demand cycle is highly seasonal. The company’s first quarter sees a decrease in demand for environmental services owing to the frigid weather, mainly in the Northern and Midwestern U.S. and Canada. As a result, reduction in volumes of waste and higher costs associated with operating in sub-zero temperatures with high levels of snowfall impair the smooth functioning of the business. However, during the first quarter of every year, demand in Industrial and Field Services and Oil and Gas Field Services segments increases in Canada due to the cold weather, while it falls during the warmer months. This is because areas in which the company provides its services are easier to access during winter months when the cold conditions make the terrain more suitable for the deployment of equipment. During the warmer months, thawing and muddy conditions hamper this process. The seasonal variations reduce the predictability of income and impair the company’s earnings.
Clean Harbors is also highly exposed to foreign exchange rate risks. The primary exposure relates to operating expenses in Canada, where a large number of the company’s manufacturing facilities are located.
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Clean Harbors Grows Inorganically Despite Economic Woes
On Sep 9, Zacks Investment Research updated the research report on waste management services provider Clean Harbors, Inc. (CLH - Free Report) .
Headquartered in Massachusetts, Clean Harbors is a chief provider of environmental, energy and industrial services in North America. The company serves a wide array of customers, including Fortune 500 companies and government agencies. It provides a number of services such as end-to-end hazardous waste management, emergency spill response, industrial cleaning and maintenance, and recycling services.
After the acquisition of Safety-Kleen, Inc. in Dec 2012, Clean Harbors became the largest re-refiner and recycler of used oil in the world and the largest provider of parts cleaning and environmental services to commercial, industrial and automotive customers in North America. The company is currently concentrating on making strategic acquisitions to expand its business in the oil collection and refinery markets. Expansion of the existing services portfolio, especially in non-disposal services, is expected to generate incremental revenues in the future.
During the last reported quarter, the company completed a series of six acquisitions totaling approximately $175 million. The transactions augmented its presence on the West Coast and supported its North American renewable lubricants program. This included terminals, re-refineries, waste oil collection and blending/packaging capabilities, which are critical components to the success of the ‘closed loop’ initiative.
The company also plans to divest a subsidiary in the Industrial Services group for approximately $50 million. This non-core business generated approximately $55 million in revenues in 2015.
However, decline in fuel prices and new policies are rapidly transforming the American energy sector, while escalating wars in the Middle East and a nuclear deal with Iran are clouding the global oil picture. The company’s exploration, drilling activity and production are largely dependent on the operation of oil rigs, as well as global and North American oil prices. The recent oil price instability and future price uncertainties have resulted in lower activity levels which are negatively impacting the company’s business.
In addition, Clean Harbors’ demand cycle is highly seasonal. The company’s first quarter sees a decrease in demand for environmental services owing to the frigid weather, mainly in the Northern and Midwestern U.S. and Canada. As a result, reduction in volumes of waste and higher costs associated with operating in sub-zero temperatures with high levels of snowfall impair the smooth functioning of the business. However, during the first quarter of every year, demand in Industrial and Field Services and Oil and Gas Field Services segments increases in Canada due to the cold weather, while it falls during the warmer months. This is because areas in which the company provides its services are easier to access during winter months when the cold conditions make the terrain more suitable for the deployment of equipment. During the warmer months, thawing and muddy conditions hamper this process. The seasonal variations reduce the predictability of income and impair the company’s earnings.
Clean Harbors is also highly exposed to foreign exchange rate risks. The primary exposure relates to operating expenses in Canada, where a large number of the company’s manufacturing facilities are located.
Clean Harbors currently holds a Zacks Rank #4 (Sell). Some better-ranked stocks in the same space include InnerWorkings Inc. , RPX Corporation and Xerox Corporation (XRX - Free Report) . All three stocks hold a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>