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Clean Harbors (CLH) Beats on Q3 Earnings, Raises 2020 View

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·4 min read
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Clean Harbors, Inc. CLH reported better-than-expected third-quarter 2020 results.

Adjusted earnings (excluding 9 cents from non-recurring items) per share of 90 cents outpaced the Zacks Consensus Estimate by more than 100% and increased 25% year over year.

Total revenues of $779.3 million also beat the consensus mark marginally. Howevert, the figure declined 12.6% year over year due to the unprecedented market conditions.

So far this year, shares of Clean Harbors have lost 28.8% compared with 15.8% decline of the industry.

Let’s check out the numbers in detail.

Revenues by Segment

Environmental Services revenues of $527.97 million declined 10.1% year over year owing to lower utilization rate of 80% at incinerators during the quarter due to the timing of turnarounds and a production lag.

Safety-Kleen revenues of $251.6 million fell 17.8% year over year.

Clean Harbors, Inc. Price, Consensus and EPS Surprise

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

Profitability Performance

Adjusted EBITDA of $161.17 million increased 2.9% year over year. Adjusted EBITDA margin increased 310 basis points (bps) year over year to 20.7%.

Adjusted EBITDA includes $13.3 million of assistance from government programs.

Segment wise, Environmental Services’ adjusted EBITDA was $140.85 million, up 15.8% year over year. The uptick was backed by cost-reduction efforts, productivity improvements, healthy mix of higher margin work and the two government programs that accounted for $10 million in this segment.

Safety-Kleen’s adjusted EBITDA of $68.76 million declined 15.5% primarily due to lower revenues, partly offset by cost-reduction efforts as well as government-assistance programs that provided $2.5 million to this segment during the third quarter.

Balance Sheet & Cash Flow

Clean Harbors exited third-quarter 2020 with cash and cash equivalents of $475.7 million compared with $447.4 million at the end of the prior quarter. Inventories and supplies were $220.9 million, up from $219.81 million in the prior quarter. Long-term debt was $1.55 billion compared with $1.63 billion in the prior quarter.

The company generated $143.9 million in cash from operating activities in the reported quarter.

Raised 2020 Guidance

Clean Harbors expects adjusted EBITDA of $530-$550 million (previous guidance: $470-$500 million).

Segment wise, adjusted EBITDA for Environmental Services is anticipated to rise in the low-teens percentage above 2019's level of $446 million. Safety-Kleen’s adjusted EBITDA is expected to decline in the high-teens percentage from 2019’s $282 million.

Net income is anticipated to be $104-$130 million (previous guidance: $53-$84 million). Adjusted free cash flow is expected between $250 million and $270 million (previous guidance: $200 million and $230 million). Net cash from operating activities is projected between $405 million and $445 million (previous guidance: $355 million and $405 million).

Currently, Clean Harbors carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Business Services Companies

Equifax EFX reported better-than-expected third-quarter 2020 results, with adjusted earnings of $1.87 per share beating the Zacks Consensus Estimate by 16.2% and rising 26.4% on a year-over-year basis. The reported figure exceeded the company’s guidance of $1.30-$1.40.

The Interpublic Group of Companies IPG reported better-than-expected third-quarter 2020 adjusted earnings of 53 cents per share, which beat the Zacks Consensus Estimate by 43.2% and rose 8.2% on a year-over-year basis.

IQVIA Holdings IQV reported solid third-quarter 2020 adjusted earnings per share of $1.63, which beat the consensus mark by 8% and inched up 1.9% on a year-over-year basis. The reported figure was above the company’s guidance of $1.47-$1.55.

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