Bear of the Day: Clean Harbors (CLH)

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Clean Harbors (CLH) is a Zacks Rank #5 (Strong Sell) that is an environmental services company providing waste management, pollution control, and energy services across North America. It specializes in hazardous waste disposal, emergency spill response, and industrial cleaning for industries like manufacturing, chemicals, and oil & gas.

The company reported earnings late last month that caused the stock to fall 17%, only to fully recover a week later. But were the buy-the-dippers too quick to jump in?

With an earnings miss and reduced guidance, analysts are revising their earnings estimates downward. This rally may present an ideal opportunity to exit the stock before potential declines set in.

About the Company

Clean Harbors was founded in 1980 and is based in Norwell, MA. The company employs over 21,000 people and operates through two segments: Environmental Services (83% of revenues) and Safety-Kleen Sustainability Solutions (17% of revenues).

The company serves clients such as Fortune 500 companies and government agencies. Clean Harbors offers end-to-end hazardous waste management, emergency response, industrial cleaning, and recycling services. Additionally, it is the world’s largest re-refiner and recycler of used oil and a leading provider of parts washers and environmental services for the commercial, industrial, and automotive sectors.

CLH is valued at $14 billion and has a Forward PE of 35. The stock holds Zacks Style Scores of “D” in Value, But “B” in both Momentum and Growth.

Q3 Earnings

The company reported earnings at the end of October, missing by 1.4%. EPS came in at $2.12 versus the $2.15 consensus, but revenue exceeded projections at $1.53 billion.

Despite year-over-year growth in Adjusted EBITDA (+19%) and free cash flow (+26%), the company lowered its FY24 guidance, citing pressures in its Safety-Kleen Sustainability Solutions (SKSS) segment, including weak base oil demand and pricing challenges.

Positive momentum remains in Environmental Services, where Field Services grew 68%, partly due to the HEPACO acquisition. Clean Harbors expects further growth opportunities in 2025 from new initiatives, like the upcoming incinerator in Nebraska, despite current market headwinds.

While there is some optimism, analysts have been quick to drop earnings estimates.

Earnings Estimates

Estimates have seen significant cuts across all time frames since the earnings report.

For the current quarter, forecasts have dropped 19% over the past 30 days, from $1.76 to $1.42.

Looking to next quarter, estimates have declined 10% in that same period, down from $1.53 to $1.38.

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