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Why Is Clean Harbors (CLH) Up 9% Since Last Earnings Report?

A month has gone by since the last earnings report for Clean Harbors (CLH). Shares have added about 9% 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' Q2 Earnings & Revenue Surpass Estimates

Clean Harbors reported solid second-quarter 2022 results wherein earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings per share (excluding 27 cents from non-recurring items) of $2.44 outpaced the Zacks Consensus Estimate by 59.5% and the year-ago quarter’s figure by 105%. Total revenues of $1.36 billion beat the consensus mark by 9.9% and grew 46.4% year over year.

Let’s check out the numbers in detail.

Revenues by Segment

Environmental Services’ (ES) revenues of $1.1 billion grew 51% year over year. The uptick was backed by contributions from the HydroChemPSC (HPC) acquisition, higher volumes in its disposal and recycling facilities, pricing initiatives, solid demand across its service businesses and strength in its Industrial Services businesses.

Safety-Kleen Sustainability Solutions’ (SKSS) revenues of $265.5 million grew 31.2% year over year. The uptick was backed by solid demand for Clean Harbors’ base oil.

Profitability Performance

Adjusted EBITDA of $309.1 million increased 65% year over year. The adjusted EBITDA margin rose to 22.8% from 20.3% in the year-ago quarter.
Segment-wise, Environmental Services’ adjusted EBITDA was $269.3 million, up 53% year over year. Safety-Kleen Sustainability Solutions’ adjusted EBITDA was $97 million, up 53.2% year over year.

Balance Sheet & Cash Flow

Clean Harbors exited second-quarter 2022 with cash and cash equivalents of $344.6 million compared with $339.58 million at the end of the prior quarter. Inventories and supplies were $275.7 million compared with $264.73 million in the prior quarter. Long-term debt was $2.51 billion  kept flat with the prior quarter.

CLH used $170.6 million of net cash from operating activities in the reported quarter. Adjusted free cash flow was $94.6 million.

Guidance

In the third quarter of 2022, Clean Harbors expects Adjusted EBITDA to increase approximately 50% from the prior-year period’s figure, indicating higher profitability in both the ES and SKSS segments, as well as the addition of HPC.

For 2022, Adjusted EBITDA is now anticipated between $975 million and $1 billion compared with the prior guidance of $800-$830 million.

Adjusted free cash flow is expected between $310 million and $350 million (prior view: $250 million and $290 million). Net cash from operating activities is projected between $630 million and $690 million (prior view: $560 million and $620 million).

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

The consensus estimate has shifted 46.29% due to these changes.

VGM Scores

At this time, Clean Harbors has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Clean Harbors has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Clean Harbors is part of the Zacks Waste Removal Services industry. Over the past month, Waste Management (WM), a stock from the same industry, has gained 0.5%. The company reported its results for the quarter ended June 2022 more than a month ago.

Waste Management reported revenues of $5.03 billion in the last reported quarter, representing a year-over-year change of +12.3%. EPS of $1.44 for the same period compares with $1.27 a year ago.

Waste Management is expected to post earnings of $1.50 per share for the current quarter, representing a year-over-year change of +19.1%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Waste Management. Also, the stock has a VGM Score of C.


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