On Friday, TD (TSX:TD) Cowen initiated coverage on Clean Harbors (NYSE:CLH) stock with a Buy rating and established a price target of $325.00. The firm highlighted Clean Harbors' leading role in the hazardous waste sector and anticipates that the company's competitive edge will continue to strengthen.
With a market capitalization of $13.3 billion and an impressive 50.8% return over the past year, the company has demonstrated strong market performance.
According to InvestingPro data, the company's expected enhancement of market position through potential mergers and acquisitions could further boost its already solid pricing power and profit margins.
The analyst pointed out that the reshoring of manufacturing activities to the United States is likely to drive volume growth for Clean Harbors. The company's revenue has already grown by 8.4% in the last twelve months, with a healthy gross profit margin of 31.2%.
Additionally, emerging regulations concerning per- and polyfluoroalkyl substances (PFAS) are seen as a positive development for the company, potentially providing new business opportunities.
Despite expressing some skepticism regarding the achievability of Clean Harbors' Vision 2027 targets, the analyst noted that current consensus estimates for the company's performance might be undervaluing its potential, being nearly 30% lower than the targets. This discrepancy suggests that the market's expectations could be too conservative compared to the company's prospects.
TD Cowen's stance on Clean Harbors reflects a confidence in the company's future performance and its ability to capitalize on market dynamics, including regulatory changes and shifts in the manufacturing landscape. The new price target of $325.00 represents a significant expectation of value growth for the company's shares.
In other recent news, Clean Harbors experienced mixed results in Q3 2024. The company reported a year-over-year revenue increase of 12%, with its adjusted EBITDA rising nearly $47 million. Notably, the Environmental Services (ES) segment saw a 13% revenue increase and a 15% rise in adjusted EBITDA.
However, the Safety-Kleen Sustainability Solutions (SKSS) segment, while experiencing a 6% revenue rise, reported an $11 million shortfall against expectations.
BMO (TSX:BMO) Capital Markets recently adjusted its price target for Clean Harbors to $273 from $281, while maintaining an Outperform rating. This adjustment reflects caution regarding the company's near-term prospects, given observed risks in some cyclical businesses. Despite this, BMO Capital believes that Clean Harbors still has robust growth and margin expansion prospects, particularly in the ES segment.
In other developments, Clean Harbors ended Q3 with a cash balance of $595 million and plans to pursue acquisitions and share buybacks. The company also revised its adjusted EBITDA guidance for 2024 to a midpoint of $1.11 billion.
Looking ahead, Clean Harbors anticipates mid-single-digit organic revenue growth and adjusted EBITDA growth in the mid to high single digits for 2025. These projections coincide with the upcoming launch of the Kimbell incinerator in Nebraska, indicating a positive outlook for the company's future.
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