Clean Harbors, Inc. (NYSE:CLH) just released its quarterly report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 7.9% to hit US$859m. Clean Harbors also reported a statutory profit of US$0.21, which was an impressive 149% above what the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus, from the ten analysts covering Clean Harbors, is for revenues of US$3.11b in 2020, which would reflect a considerable 11% reduction in Clean Harbors' sales over the past 12 months. Statutory earnings per share are forecast to plunge 63% to US$0.71 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$3.11b and earnings per share (EPS) of US$1.10 in 2020. So there's definitely been a decline in sentiment after the latest results, noting the large cut to new EPS forecasts.
The consensus price target held steady at US$63.80, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Clean Harbors, with the most bullish analyst valuing it at US$75.00 and the most bearish at US$49.00 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Clean Harbors shareholders.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 11% revenue decline a notable change from historical growth of 1.5% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 2.8% annually for the foreseeable future. It's pretty clear that Clean Harbors' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at US$63.80, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Clean Harbors analysts - going out to 2024, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Clean Harbors that you should be aware of.
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