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Clean Harbors (CLH) Up 8% 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 8% in that time frame, underperforming 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 drivers.

Clean Harbors' Q3 Earnings & Revenue Surpass Estimates

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

Adjusted earnings per share (excluding 7 cents from non-recurring items) of $2.43 outpaced the Zacks Consensus Estimate by 20.3% and the year-ago quarter’s figure by 113.2%. Total revenues of $1.36 billion beat the consensus mark by 5.4% and grew 43.3% year over year.

Let’s check out the numbers in detail.

Revenues by Segment

Environmental Services’ (ES) revenues of $1.09 billion grew 46% year over year. The uptick was backed by contributions from the HydroChemPSC (HPC) acquisition, higher volumes of high-value waste streams, pricing initiatives, solid demand across its service businesses and strength in its Industrial Services businesses.

Safety-Kleen Sustainability Solutions’ (SKSS) revenues of $276.3 million grew 34% year over year. The uptick was backed by solid demand for Clean Harbors’ base oil.

Profitability Performance

Adjusted EBITDA of $308.6 million increased 67% year over year. The adjusted EBITDA margin rose to 22.6% from 19.5% in the year-ago quarter.

Segment-wise, Environmental Services’ adjusted EBITDA was $260.7 million, up 57% year over year. Safety-Kleen Sustainability Solutions’ adjusted EBITDA was $103.2 million, up 45.8% year over year.

Balance Sheet & Cash Flow

Clean Harbors exited third-quarter 2022 with cash and cash equivalents of $449 million compared with $344.6 million at the end of the prior quarter. Inventories and supplies were $294.2 million compared with $275.7 million in the prior quarter. Long-term debt of $2.51 billion was flat with the prior quarter’s level.

CLH generated $225.6 million of net cash from operating activities in the reported quarter. Adjusted free cash flow was $131.2 million.

Guidance

For 2022, Adjusted EBITDA is now anticipated between $1.010 billion and $1.030 billion compared with the prior guidance of $975-$1 billion.

Adjusted free cash flow is expected between $260 million and $290 million (prior view: $310 million and $350 million). Net cash from operating activities is projected between $585 million and $635 million (prior view: $630 million and $690 million).

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -6.06% due to these changes.

VGM Scores

At this time, Clean Harbors has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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. Notably, Clean Harbors has a Zacks Rank #2 (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, Republic Services (RSG), a stock from the same industry, has gained 6.1%. The company reported its results for the quarter ended September 2022 more than a month ago.

Republic Services reported revenues of $3.6 billion in the last reported quarter, representing a year-over-year change of +22.6%. EPS of $1.34 for the same period compares with $1.11 a year ago.

For the current quarter, Republic Services is expected to post earnings of $1.04 per share, indicating a change of +2% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Republic Services. Also, the stock has a VGM Score of B.

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