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Clean Harbors Poised for Growth Despite Short-Term Woes
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On Jan 3, Zacks Investment Research updated the research report on waste management service provider Clean Harbors, Inc. (CLH - Free Report) .
With 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 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.
The company is focused on improving its efficiency and lowering operating costs through enhanced technology, process efficiencies and stringent cost management initiatives. Clean Harbors tends to have a competitive advantage around the treatment, storage and disposal facility (TSDF). Hence, by setting up additional service locations near TSDFs, the company expects to minimize capital expenditures and increase its market share within the Industrial and Field Services segment. This, in turn, will increase capacity utilization and improve overall profitability.
Such strategic initiatives have enabled Clean Harbors to outperform the Zacks categorized Waste Removal Services industry with an average return of 16.0% in the last three months compared with 6.4% for the latter.
The company continues to make capital investments to enhance its quality and comply with government and local regulations. The current regulatory requirements are cost intensive and complicated for in-house disposal facilities, which compel most companies to outsource their hazardous waste disposal needs. This is where Clean Harbors steps in with its suitable disposal firms in Canada and the U.S.
However, decline in fuel prices and new policies are rapidly transforming the American energy sector, while escalating wars in the Middle East are clouding the global oil picture. The company’s exploration, drilling activity and production are largely dependent upon the operation of oil rigs, as well as global and North American oil prices. Volatility in oil prices and future price uncertainties have resulted in lower activity levels which are negatively impacting the business' results.
In addition, Clean Harbors is highly exposed to foreign exchange rate risks. The primary exposure relates to operating expenses in Canada, where a large extent of the company’s manufacturing facilities are located. The lodging operations of the company are also located entirely in Canada. An unfavorable movement in foreign currency exchange rates adversely impacts the company’s performance.
Nevertheless, we remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the industry include Waste Management, Inc. (WM - Free Report) , Advanced Disposal Services, Inc. and Aqua Metals, Inc. (AQMS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Waste Management has a long-term earnings growth expectation of 9.8% and has beaten estimates in all the trailing four quarters for an average earnings surprise of 4.8%.
Advanced Disposal Services has comfortably beaten estimates in the last reported quarter with an earnings surprise of 50%.
Aqua Metals has beaten estimates once in the trailing four quarters for an average negative earnings surprise of 18.3%.
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Clean Harbors Poised for Growth Despite Short-Term Woes
On Jan 3, Zacks Investment Research updated the research report on waste management service provider Clean Harbors, Inc. (CLH - Free Report) .
With 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 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.
The company is focused on improving its efficiency and lowering operating costs through enhanced technology, process efficiencies and stringent cost management initiatives. Clean Harbors tends to have a competitive advantage around the treatment, storage and disposal facility (TSDF). Hence, by setting up additional service locations near TSDFs, the company expects to minimize capital expenditures and increase its market share within the Industrial and Field Services segment. This, in turn, will increase capacity utilization and improve overall profitability.
Such strategic initiatives have enabled Clean Harbors to outperform the Zacks categorized Waste Removal Services industry with an average return of 16.0% in the last three months compared with 6.4% for the latter.
The company continues to make capital investments to enhance its quality and comply with government and local regulations. The current regulatory requirements are cost intensive and complicated for in-house disposal facilities, which compel most companies to outsource their hazardous waste disposal needs. This is where Clean Harbors steps in with its suitable disposal firms in Canada and the U.S.
However, decline in fuel prices and new policies are rapidly transforming the American energy sector, while escalating wars in the Middle East are clouding the global oil picture. The company’s exploration, drilling activity and production are largely dependent upon the operation of oil rigs, as well as global and North American oil prices. Volatility in oil prices and future price uncertainties have resulted in lower activity levels which are negatively impacting the business' results.
In addition, Clean Harbors is highly exposed to foreign exchange rate risks. The primary exposure relates to operating expenses in Canada, where a large extent of the company’s manufacturing facilities are located. The lodging operations of the company are also located entirely in Canada. An unfavorable movement in foreign currency exchange rates adversely impacts the company’s performance.
Nevertheless, we remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the industry include Waste Management, Inc. (WM - Free Report) , Advanced Disposal Services, Inc. and Aqua Metals, Inc. (AQMS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Waste Management has a long-term earnings growth expectation of 9.8% and has beaten estimates in all the trailing four quarters for an average earnings surprise of 4.8%.
Advanced Disposal Services has comfortably beaten estimates in the last reported quarter with an earnings surprise of 50%.
Aqua Metals has beaten estimates once in the trailing four quarters for an average negative earnings surprise of 18.3%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>