Baird has made an adjustment to the price target for Clean Harbors (NYSE: NYSE:CLH), increasing it to $300 from the previous target of $268. The firm has kept its Outperform rating on the stock.
The revision reflects a change in the third-quarter 2024 earnings before interest, taxes, depreciation, and amortization (EBITDA) estimate, which is now slightly higher but still within the expected range.
This adjustment is due to a modification in the spread assumption for Safety-Kleen Sustainability Solutions (SKSS) based on actual base oil pricing, as well as refined acquisition expectations.
The analyst at Baird indicated that the updated spread assumption for the third quarter of 2024 in SKSS is now set at a decrease of $0.20 quarter-over-quarter. This new figure aligns with the actual movement in Group II base oil prices, contrasting with the previously flat assumption. This nuanced adjustment comes as part of the firm's detailed financial analysis and forecasting for Clean Harbors.
In addition to updating the third-quarter projections, Baird has also introduced initial estimates for the year 2026. These projections are part of the rationale for the increased price target. The new target of $300 is based on a 13 times multiple of the projected enterprise value to 2026 estimated EBITDA. This valuation metric is a common tool used by analysts to assess the price target of a company based on its future earnings potential.
Clean Harbors, a provider of environmental, energy, and industrial services, has been under the scrutiny of Baird's analysts as they monitor the company's financial performance and market position. The firm's maintenance of an Outperform rating suggests a positive outlook on the stock's potential to perform well in the market relative to its peers.
In other recent news, Clean Harbors, a hazardous waste management company, has made several significant moves that have caught the attention of investors. The company recently amended its credit agreement, securing more favorable borrowing terms, which includes a significant reduction in the interest rate margin for its 2021 Incremental Term Loans. This strategic move is expected to lower the company's borrowing costs and increase financial flexibility.
In addition to financial maneuvers, Clean Harbors reported record-breaking quarterly revenue and adjusted EBITDA for the second quarter of 2024, exceeding market expectations. This strong performance was largely due to high demand in its Environmental Services segment and significant contributions from the recent acquisition of HEPACO. In response to these impressive results, the company raised its adjusted EBITDA guidance for the year.
Clean Harbors also expanded its board to 13 members, appointing Co-CEOs Michael Battles and Eric Gerstenberg as directors. This move aligns with the company's Vision 2027 growth strategy. Investment firms BMO Capital and Oppenheimer have expressed confidence in the company, with both firms raising their price targets and maintaining Outperform ratings.
Moreover, the company revealed a strong project pipeline expected to continue into 2025. Organic growth initiatives, such as the Kimball and Baltimore expansions, along with the performance of recent mergers and acquisitions, are anticipated to drive growth.
InvestingPro Insights
Clean Harbors' recent performance aligns with Baird's optimistic outlook. According to InvestingPro data, the company's stock is trading near its 52-week high, with a price at 98.15% of its peak. This strength is reflected in the impressive 63.84% price total return over the past year, and a substantial 32.65% return in just the last six months.
The company's financial health appears robust, with revenue growth of 11.08% in the most recent quarter. Clean Harbors maintains a solid operating income margin of 11.41%, indicating efficient management of its operations. These metrics support Baird's decision to raise the price target and maintain an Outperform rating.
InvestingPro Tips highlight that Clean Harbors operates with a moderate level of debt and has liquid assets exceeding short-term obligations, which could provide financial flexibility as the company pursues growth opportunities. Additionally, analysts predict profitability for the current year, aligning with Baird's positive outlook.
For investors seeking a deeper understanding of Clean Harbors' potential, InvestingPro offers 12 additional tips, providing a comprehensive view of the company's market position and financial health.
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