Clean Harbors' Financial Strength And Solid EBITDA Growth Signal Bullish Future: Analyst

Needham analyst James Ricchiuti reiterated a Buy rating on Clean Harbors, Inc. CLH, raising the price target to $182 from $150.

The analyst thinks CLH's business is resilient, even in the current tepid economic environment.

CLH has entered the 2H23 with a solid tailwind behind its Environmental Services (ES) business, driven by its record waste backlog exiting Q1, notes the analyst.

Ricchiuti believes the ES business can continue to grow more than GDP and industrial production, benefiting in part from pricing. 

The analyst applauds CLH's strong financial position, with $376 million of cash and securities on the balance sheet as of March 2023 and total debt of $2.4 billion. Net debt leverage stood at 2.0x, slightly higher vs. 1.9x at the end of December.

Also Read: Analyst Sees Upside In Clean Harbors, Cites Sizeable Fleet, Margin Gains & Accretive M&A As Catalysts

For the ES business, the analyst predicts solid double-digit growth in adj. EBITDA this year, including pricing actions, reshoring trends, and the addition of the Thomson Industrial business.

For FY23, the analyst raised adj. EBITDA estimate to $1.046 billion from $1.045 billion, vs. guidance of $1.02 billion - $1.06 billion. 

Ricchiuti believes there is an upside to Street and his adj. EBITDA estimates for 2023. 

For FY24, the analyst continues to forecast adj. EBITDA of $1.11 billion.

The Safety-Kleen Sustainability Solutions (SKSS) business is also expected to deliver solid adj. EBITDA, albeit down from its unusually strong performance in 2022, mentions the analyst.

CLH's target model going out to 2027 will have adj. EBITDA CAGR of 200-300 bps above revenue growth, reaching $1.4 billion and generating free cash flow of $600 million, the analyst adds.

Price Action: CLH shares are trading higher by 2.17% to $167.76 on the last check Friday.