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Clean Harbors (CLH) Up 13.7% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Clean Harbors (CLH). Shares have added about 13.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Clean Harbors 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 catalysts.

Clean Harbors Beats Q1 Earnings & Revenue Estimates

Clean Harbors reported solid first-quarter 2020 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

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Adjusted earnings per share of 28 cents outpaced the consensus mark as well as the year-ago quarter by more than 100%. Total revenues of $858.6 million beat the consensus estimate by 7.7% and increased 10% year over year on the back of solid growth across its both operating segments.

Revenues by Segment

Environmental Services revenues of $566.36 million increased 11.3% year over year. The segment benefited from contributions from facilities network, Field Services group and warmer weather during the reported quarter.

Safety-Kleen revenues of $293.21 million increased 7.6% year over year on the back of growth in the Safety-Kleen Oil business.

Profitability Performance

Adjusted EBITDA of $122.6 million increased 21% year over year. Adjusted EBITDA margin increased 130 basis points (bps) year over year to 14.3%.

Segment wise, Environmental Services’ adjusted EBITDA was $108.9 million, up 21.6% year over year. Adjusted EBITDA margin improved 160 bps. The uptick was backed by business mix, disposal volumes and emergency response revenue.

Safety-Kleen’s adjusted EBITDA of $61.1 million improved 11.6% year over year and adjusted EBITDA margin improved 80 bps. The uptick was backed by lower Safety-Kleen Oil transportation costs and higher re-refining production

Balance Sheet & Cash Flow

Clean Harbors exited first-quarter 2020 with cash and cash equivalents of $432.21 million compared with $371.99 million at the end of the prior quarter. Inventories and supplies were $216.53 million, up from $214.74 million in the prior quarter. Long-term debt was $1.70 billion compared with $1.55 billion in the prior quarter.

The company generated $33.7 million in cash from operating activities in the reported quarter.

During the reported quarter, the company repurchased nearly 300,000 shares for an average price of $57.41 per share for a total of $17.3 million.

2020 Guidance

Considering the current uncertainty prevailing in the market, Clean Harbors has withdrawn its 2020 guidance. The company expects to unveil the same during its second-quarter 2020 earnings release if markets stabilize.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -84.72% due to these changes.

VGM Scores

Currently, Clean Harbors has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Clean Harbors has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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