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Clean Harbors (CLH) Up 10.2% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Clean Harbors, Inc. (CLH - Free Report) . Shares have added about 10.2% in that time frame.

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

Recent Earnings

Clean Harbors, Inc.’s 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.

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.

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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower.

Clean Harbors, Inc. Price and Consensus

VGM Scores

At this time, CLH has a great Growth Score of A, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

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




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