Clean Harbors (CLH) Misses On Q3 Earnings, Lowers View

Clean Harbors, Inc. (NYSE:CLH) reported dismal third-quarter 2016 adjusted earnings of $9.3 million or 16 cents per share, compared with $40.2 million or 69 cents per share in the prior-year quarter. The decline was due to weak industrial and energy market conditions. Adjusted earnings for the reported quarter comprehensively missed the Zacks Consensus Estimate of 30 cents.

GAAP loss for the reported quarter was $10.3 million or loss of 18 cents per share as against income of $40.2 million or 69 cents per share in the year-earlier quarter. The deterioration in net income was primarily due to a significant fall in revenues.

Net revenues were $729.5 million, down 18.3% from the prior-year period, primarily due to the $145 million contribution from emergency response activity in third-quarter 2015, as well as the continued industrial slowdown, softness in energy, and fewer large project opportunities in the reported quarter. Revenues also missed the Zacks Consensus Estimate of $734 million. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) for the reported quarter decreased to $126.7 million from $165.6 million in the year-ago quarter.

Segment Details

Technical Services was the company’s largest contributor of revenues, accounting for 37.3% of the total revenue. Segment revenues in the quarter declined 5.8% from the prior-year quarter to $271.8 million due to the lack of remediation projects and landfill volumes. Adjusted EBITDA declined 8.5% year over year to $72.3 million.

Industrial and Field Services’ revenues accounted for 22.2% of total revenues in the reported quarter. Segment revenues declined to $149.4 million from $299.9 million in the prior-year quarter, due to major emergency response events or large unexpected outages at its customers' plants. Also customers still remain reluctant to spend on projects. Adjusted EBITDA showed a sharp decline of 70.2% to $18.6 million, largely due to lower revenues.

Kleen Performance Products’ revenues increased to $92.6 million from $77.1 million in the prior-year quarter. Revenue was up substantially as the company fully benefited from their strategic move to charge-for-oil versus pay-for-oil a year ago. However, adjusted EBITDA was up from the year-ago quarter to $22.8 million.

SK Environmental Services’ revenues accounted for 24.1% of the total revenue. Segment revenues increased year over year to $175.8 million from $165.9 million in the year-ago quarter. Adjusted EBITDA for the reported quarter also improved 18% to $47.3 million, largely attributable to an improvement in the business mix, pricing and cost reductions.

Lodging Services revenues were up for the first time in three years to $15.8 million from $14.3 million due to temporary boost in occupancy resulting from the Fort McMurray fire. Adjusted EBITDA was up over 100% year over year to $4.1 million due to the cost reductions and higher revenue.

Oil and Gas Field Services revenues declined 48.5% to $24.7 million due to slowdown in energy markets both in the U.S. and Canada. Future price uncertainty has resulted in lower activity levels which are negatively impacting the business' results. A major part of the segment's operations are in Canada, and therefore U.S. to Canadian dollar foreign currency translation significantly affects the segment's results. The company incurred a negative adjusted EBITDA of $4.4 million as against positive adjusted EBITDA of $1.6 million in the year-ago quarter due to lower revenues, margin pressure and the effect of currency translation.

Balance Sheet and Cash Flow

At the end of the third quarter, the company’s cash and cash equivalents were $257.9 million. Cash flow from operations totaled $58.8 million in the reported quarter. Long-term debt was $1,632.6 million. Clean Harbors repurchased shares worth $6.2 million, while it still has approximately $106 million remaining under its existing $300 million plan.

Guidance Down

For 2016, Clean Harbors reduced its adjusted EBITDA guidance in the range of $400–$410 million from earlier expectation of $430–$490 million. For 2016, the company expects net loss in the range of $38 million to $51 million. Adjusted earnings for 2016 are expected in the range of an adjusted net loss of $10 million to adjusted net income of $7 million.

Clean Harbors currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks include Acacia Research Corporation (NASDAQ:ACTG) , Navigant Consulting Inc. (NYSE:NCI) and Waste Management, Inc. (NYSE:WM) . Waste Management carries a Zacks Rank 2 (Buy), whereas Navigant and Acacia Research both sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Acacia Research has a modest earnings record, surpassing estimates twice in the four trailing quarters, with an average positive surprise of 551.79%. The company’s share price has increased by approximately 35.20% year to date.

Navigant has a solid earnings record, beating estimates on all occasions in the four trailing quarters, with an average positive surprise of 29.31%. The company’s share price has increased by approximately 42.03% year to date.

Waste Management has a solid earnings history, beating estimates on all occasions, with an average beat of 4.77%. The company’s share price has increased by approximately 19.24% year to date.

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