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Clean Harbors (CLH) Beats on Q2 Earnings, Revises '19 View

Zacks Equity Research

Clean Harbors, Inc. CLH reported mixed second-quarter 2019 results, wherein the company’s earnings surpassed the Zacks Consensus Estimate but revenues missed the same.

Adjusted earnings per share of 66 cents beat the consensus mark by 4 cents and improved 22.2% year over year. Total revenues of $868.7 million lagged the consensus estimate by $6.8 million but increased 2.3% year over year.

During the reported quarter, the company acquired an environmental services firm based in the Pacific Northwest for nearly $15 million. The buyout is expected to enhance the Environmental Services segment in the Western region.

So far this year, shares of Clean Harbors have gained 54% compared with 26.1% rise of the industry it belongs to.


Let’s check out the numbers in detail.

Revenues by Segment

Environmental Services revenues of $563.08 million increased 1.5% year over year on the back of robust growth in facilities group, which more than offset lower industrial turnaround activities. The segment accounted for 65% of total revenues.

Safety-Kleen revenues of $305.98 million increased 3.9% year over year due to growth in the majority of core branch offerings, pricing initiatives and higher production levels at the re-refineries. The segment contributed 35% to total revenues.

Clean Harbors, Inc. Revenue (TTM)


Clean Harbors, Inc. Revenue (TTM)

Clean Harbors, Inc. revenue-ttm | Clean Harbors, Inc. Quote

Profitability Performance

Adjusted EBITDA increased 7.4% year over year to $149.83 million on strength across both Environmental Services and Safety-Kleen segments. Adjusted EBITDA margin increased 80 basis points (bps) year over year to 17.2%, reflecting the highest margin in roughly three years.

Clean Harbors, Inc. Price, Consensus and EPS Surprise


Clean Harbors, Inc. Price, Consensus and EPS Surprise

Clean Harbors, Inc. price-consensus-eps-surprise-chart | Clean Harbors, Inc. Quote

Segment wise, Environmental Services’ adjusted EBITDA was $117.87 million, up 7.9% year over year on the back of higher pricing in disposal network, high-value waste streams, cost-reduction initiatives and operational efficiencies. Focus on driving higher-margin volumes helped the company in partially offsetting the decline in utilization.

Safety-Kleen’s adjusted EBITDA of $79.46 million improved 8.7% year over year and adjusted EBITDA margins improved 120 bps to 26%. The overall improvement can be attributed to higher revenues, ongoing pricing improvement programs and cost-reduction initiatives within the branches. The company also benefited from investments (made in 2017) in Safety-Kleen's national customer care center.

Balance Sheet & Cash Flow

Clean Harbors exited second-quarter 2019 with cash and cash equivalents of $204.46 million compared with $167.37 million at the end of the prior quarter. Inventories and supplies were $203.33 million, up from $200.81 million in the prior quarter. Long-term debt of $1.56 billion was flat sequentially.

The company generated $108.73 million in cash from operating activities in the reported quarter. Adjusted free cash flow was $52.37 million.

During the reported quarter, the company repurchased 74,000 shares for average price of slightly less than $67 per share for a total of $4.9 million.


The company updated its guidance for 2019. It now expects adjusted EBITDA of $520-550 million compared with the prior guided range of $510-$540 million. Segment wise, adjusted EBITDA for Environmental Services is anticipated to increase in low-teens percentage. Safety-Kleen’s adjusted EBITDA is expected to grow in low single-digit range.

Net income is now anticipated in the range of $82-$115 million compared with the previously guided range of $77-$110 million.

Adjusted free cash flow is now expected between $200-220 million compared with the previously guided range of $190-$220 million. Net cash from operating activities is now projected between $390 million and $430 million compared with the prior guided range of $380-$430 million. Adjusted effective tax rate is expected to be in the range of 28-31%.

Zacks Rank & Upcoming Releases

Currently, Clean Harbors carries a Zacks Rank #4 (Sell).

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

Investors interested in the broader Zacks Business Services sector are awaiting second-quarter 2019 earnings of key players like Genpact G, Green Dot GDOT and Navigant Consulting NCI. While Genpact and Green Dot are slated to report on Aug 7, Navigant Consulting is scheduled to release results on Aug 8.

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