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Clean Harbors (CLH) Up 6.6% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Clean Harbors (CLH). Shares have added about 6.6% 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 the most recent earnings report in order to get a better handle on the important drivers.

Clean Harbors' Q2 Earnings & Revenue Surpass Estimates

Clean Harbors reported solid second-quarter 2021 results wherein earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings per share of $1.19 outpaced the Zacks Consensus Estimate by 52.6% and increased more than 100% year over year. Total revenues of $926.45 million beat the consensus mark by 9.6% and grew 30.5% year over year due to the unprecedented market conditions.

Quarterly results benefited from a steady flow of high-value waste streams into the company’s disposal network, solid performance of Safety-Kleen Sustainability Solutions business and demand for service offerings.

Revenues by Segment

Environmental Services revenues of $724.09 million grew 18.2% year over year. The uptick was backed by growth in disposal and recycling volumes, surge in Industrial Services activity, demand for incineration network and improvement in landfill business.

Safety-Kleen Sustainability Solutions revenues of $202.28 million grew more than 100% year over year. The uptick was backed by the combination of the company’s waste oil collection with its Safety-Kleen Oil business.

Profitability Performance

Adjusted EBITDA of $187.77 million increased 36% year over year. Adjusted EBITDA margin increased 80 basis points (bps) year over year to 20.3%.

Segment wise, Environmental Services’ adjusted EBITDA was $176.04 million, down 0.1% year over year. Safety-Kleen Sustainability Solutions’ adjusted EBITDA was $63.31 million, up more than 100% year over year.

Balance Sheet & Cash Flow

Clean Harbors exited second-quarter 2021 with cash and cash equivalents of $595.57 million compared with $496.38 million at the end of the prior quarter. Inventories and supplies were $215.73 million compared with $219.49 million in the prior quarter. Long-term debt of $1.55 billion was flat sequentially.

The company generated $162.43 million in net cash from operating activities in the reported quarter. Adjusted free cash flow was $114.63 million.

Guidance

Clean Harbors has raised its guidance for the full year. Adjusted EBITDA is now anticipated between $620 million and $650 million compared with the prior-guided range of $560-$600 million. Net income is now anticipated between $159 million and $193 million, compared with the prior-guided range of $116-$157 million. Adjusted free cash flow is now expected between $285 million and $315 million, compared with the prior-guided range of $230-$270 million. Net cash from operating activities is now projected between $475 million and $525 million, compared with the prior-guided range of $415-$475 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 33.56% due to these changes.

VGM Scores

At this time, Clean Harbors has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Clean Harbors has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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