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Clean Harbors (CLH) Down on Wider-than-Expected Q1 Loss

Clean Harbors, Inc. CLH reported a first-quarter 2016 adjusted loss of $13 million or 22 cents per share, compared with a net loss of $7.1 million or 12 cents per share in the prior-year quarter. The net loss was broader than the Zacks Consensus Estimate of a loss of 21 cents. Consequently, the company’s shares have fallen by 3.36% to $47.75 as of May 4, 2016.

GAAP loss for the reported quarter was $20.9 million or 36 cents per share compared with a loss $7.1 million or 12 cents per share in the prior year. The deterioration was primarily due to a fall in revenues.

Clean Harbors reported net revenues of $636.1 million in the quarter, down 13.2% from the prior year due to softness in the energy market, base oil pricing and currency headwinds. Revenues also missed the Zacks Consensus Estimate of $658 million. Adjusted EBITDA for the reported quarter decreased to $67.3 million from $78.3 million in the year-ago quarter.

Segment Details

Tech Services was the company’s largest contributor of revenues, accounting for 40% of the total. Segment revenues in the quarter declined 8% from the prior year to $254.3 million due to unfavorable currency translation. Adjusted EBITDA declined 4.7% year over year to $60.4 million.

Industrial and Field Services revenues accounted for 18% of total revenues in the reported quarter. Segment revenues declined 18.7% to $114.1 million due to the lackluster sales environment that resulted in customer reluctance to spend on projects, as well as an adverse currency translation effect. Adjusted EBITDA showed a sharp decline of 79.6% to $2.1 million, largely due to lower revenues.

Kleen Performance Products revenues declined 26% to $58.1 million owing to a weak oil industry. However, adjusted EBITDA was up significantly from the year-ago quarter to $4.6 million.

SK Environmental Services revenues accounted for 25% of the total. Segment revenues increased 7.8% year over year to $160.7 million. Adjusted EBITDA for the reported quarter also improved 30.5% to $35.5 million, largely attributable to an improvement in the business mix, pricing and cost reductions.

Lodging Services revenues fell 53.6% year over year to $15.9 million due to decreases in the occupancy rate resulting from overall lower activity in oil-related industries in Western Canada. Adjusted EBITDA showed a considerable decline of 85.5% year over year to $1 million on lower segment revenues.

Oil and Gas Field Services revenues declined 39.9% to $33 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 $1.4 million versus positive adjusted EBITDA of $1.4 million in the year-ago quarter due to lower revenues, margin pressure and the effect of currency translation.

Balance Sheet and Cash Flow

In first-quarter 2016, the company’s cash and cash equivalents were $355.3 million. Cash flow from operations totaled $39.3 million in the reported quarter, approximately half of last year's total due to the 13% decrease in revenue. Long-term debts were $1,631.6 million. Clean Harbors repurchased shares worth $5 million, while it still has approximately $117 million worth of shares available for buyback under its existing stock repurchase program.

Guidance

For 2016, Clean Harbors reiterated its adjusted EBITDA guidance in the range of $430–$490 million. The company continues to expect cash flow from operations in the range of $350 million to $400 million and free cash flow between $150 million and $200 million.

Clean Harbors carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same space include Quest Resource Holding Corporation QRHC, Nuverra Environmental Solutions, Inc. NESC and Waste Management, Inc. WM. All three carry a Zacks Rank #2 (Buy).

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WASTE MGMT-NEW (WM): Free Stock Analysis Report
 
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QUEST RES HLDG (QRHC): Free Stock Analysis Report
 
NUVERRA ENV SOL (NESC): Free Stock Analysis Report
 
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