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Environmental and industrial services company Clean Harbors (NYSE:CLH) beat analysts' expectations in Q2 CY2024, with revenue up 11.1% year on year to $1.55 billion. It made a GAAP profit of $2.46 per share, improving from its profit of $2.13 per share in the same quarter last year.
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Clean Harbors (CLH) Q2 CY2024 Highlights:
- Revenue: $1.55 billion vs analyst estimates of $1.53 billion (1.5% beat)
- EPS: $2.46 vs analyst estimates of $2.22 (10.8% beat)
- Raised EBITDA Guidance for the full year to $1.15 billion at the midpoint, above analyst estimates of $1.13 billion
- Gross Margin (GAAP): 33.3%, up from 32.2% in the same quarter last year
- Free Cash Flow of $79.93 million is up from -$118.4 million in the previous quarter
- Market Capitalization: $12.1 billion
Established in 1980, Clean Harbors (NYSE:CLH) provides environmental and industrial services like hazardous and non-hazardous waste disposal and emergency spill cleanups.
Waste ManagementWaste management companies can possess licenses permitting them to handle hazardous materials. Furthermore, many services are performed through contracts and statutorily mandated, non-discretionary, or recurring, leading to more predictable revenue streams. However, regulation can be a headwind, rendering existing services obsolete or forcing companies to invest precious capital to comply with new, more environmentally-friendly rules. Lastly, waste management companies are at the whim of economic cycles. Interest rates, for example, can greatly impact industrial production or commercial projects that create waste and byproducts.
Sales GrowthExamining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Clean Harbors grew its sales at an impressive 10.9% compounded annual growth rate. This is encouraging because it shows Clean Harbors's offerings resonate with customers, a helpful starting point.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Clean Harbors's annualized revenue growth of 10.7% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong.
This quarter, Clean Harbors reported robust year-on-year revenue growth of 11.1%, and its $1.55 billion of revenue exceeded Wall Street's estimates by 1.5%. Looking ahead, Wall Street expects sales to grow 9.3% over the next 12 months, a deceleration from this quarter.
Operating MarginOperating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling them, and, most importantly, keeping them relevant through research and development.
Clean Harbors has managed its expenses well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 10.4%.
Looking at the trend in its profitability, Clean Harbors's annual operating margin rose by 4.3 percentage points over the last five years, as its sales growth gave it operating leverage.
This quarter, Clean Harbors generated an operating profit margin of 13.9%, in line with the same quarter last year. This indicates the company's cost structure has recently been stable.
EPSWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Clean Harbors's EPS grew at an astounding 36.8% compounded annual growth rate over the last five years, higher than its 10.9% annualized revenue growth. This tells us the company became more profitable as it expanded.
We can take a deeper look into Clean Harbors's earnings quality to better understand the drivers of its performance. As we mentioned earlier, Clean Harbors's operating margin was flat this quarter but expanded by 4.3 percentage points over the last five years. On top of that, its share count shrank by 3.2%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Clean Harbors, its two-year annual EPS growth of 13.3% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.
In Q2, Clean Harbors reported EPS at $2.46, up from $2.13 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Clean Harbors to grow its earnings. Analysts are projecting its EPS of $7.24 in the last year to climb by 11.7% to $8.08.
Key Takeaways from Clean Harbors's Q2 Results It was good to see Clean Harbors beat analysts' revenue and EPS expectations this quarter. We were also excited it raised its full-year EBITDA guidance, which topped Wall Street's estimates. Overall, we think this was a strong quarter that should satisfy shareholders. The stock traded up 2.7% to $230.50 immediately following the results.
