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Clean Harbors' (CLH) Loss Narrows in Q1, Guidance Intact

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Clean Harbors, Inc.’s (CLH - Free Report) first-quarter 2018 adjusted loss came in at 12 cents per share compared with a loss of 19 cents in the year-ago quarter. The figure was narrower than the Zacks Consensus Estimate of a loss of 14 cents.

Revenues came in at $749.8 million, surpassing the consensus mark of $717.8 million and increasing 8.8% year over year on growth across key verticals.

During the earnings call, management stated that the integration of Veolia's U.S. industrial business that was acquired in the fourth quarter is in progress. The acquisition is expected to provide significant scale and industrial services capabilities while doubling the size of the existing U.S. Industrial Services business.

The acquired business’s operational footprint, particularly the strong presence in the Midwest, will complement Clean Harbors’ existing network of locations. Addition of this business will create new cross-selling opportunities and drive incremental volumes into waste disposal network.

Notably, shares of Clean Harbors have declined 17.8% in the past year against the 11% gain of its industry.

Let’s take a closer look at the numbers.

Segmental Revenues

Starting this year, the company has formed a regional sales and service organization and created the Environmental Services segment. The new segment includes Technical Services, Industrial and Field Services, and Oil, Gas and Lodging segments.

Environmental Services accounted for 63% of total revenues in the reported quarter and improved 10.2% year over year to $472.4 million. Growth was driven by strength in Industrial Services lines of business, Veolia acquisition, higher volumes in the company’s disposal network, strong base business and project work. The segment benefited from the improving industrial economy that boosted key industry verticals like chemical, manufacturing, and energy.

Safety-Kleen revenues increased to $278 million from $260.8 million in the prior-year quarter. The growth was buoyed by higher base oil and blended pricing and strength in the company’s branch network.

Clean Harbors, Inc. Revenue (TTM)

Profitability Performance

Adjusted EBITDA of $88.3 million increased 10% year over year. Adjusted EBITDA margin increased 22 basis points (bps) year over year to 22.3%.

By segments, Environmental Services’ adjusted EBITDA was $61.4 million, up 2% year over year. Safety-Kleen’s adjusted EBITDA of $61.8 million showed an improvement of 18.2% year over year.

Balance Sheet, Cash Flow, Share Repurchase

Clean Harbors exited the quarter with cash and cash equivalents of $186.4 million, down from $319.4 million in the fourth quarter of 2017. Inventories and supplies were $181.4 million, up from $176 million in the prior quarter. The company had long-term debt of $1.6 billion at the end of the quarter.

Cash flow from operating activities was $51.9 million compared with $57.1 million in the prior quarter. Adjusted free cash flow totaled $8.5 million versus $15.7 million in the preceding quarter.

During the first quarter, the company repurchased approximately 280,000 shares for $14.3 million.

2018 Guidance

Clean Harbors reiterated its 2018 guidance. It expects adjusted EBITDA in the range of $440−$480 million. Veolia U.S. industrial business is expected to add $8-$10 million to adjusted EBITDA.

Net cash from operating activities is projected between $295 million and $345 million. Adjusted free cash flow is expected in the range of $125 million to $155 million.

Zacks Rank & Upcoming Releases

Clean Harbors has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Business Services sector are keenly awaiting earnings reports from key players like Gartner, Inc. (IT - Free Report) , The Dun & Bradstreet Corp. (DNB - Free Report) and Broadridge Financial Solutions Inc. (BR - Free Report) . While Garter and Dun & Bradstreet will release first-quarter 2018 results on May 8 and May 9, respectively, Broadridge will report third-quarter fiscal 2018 numbers on May 8.

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