Clean Harbors Inc.CLH

Morningstar Rating

Stock Research and Analysis

by Bradley Meeks

We think costly regulatory expenses, decreasing incinerator capacity, and high barriers to entry provide a favorable backdrop to keep this narrow-moat firm at the top of the heap.

The hazardous waste disposal industry is a $3 billion industry, created in large part by the Resource Conservation and Recovery Act (RCRA) of 1976. Read more

Bulls Say

As firms weigh the added costs of maintaining incinerator facilities in a strict regulatory environment, increased outsourcing of hazardous waste services could boost the market opportunity for Clean Harbors.

The company has unparalleled assets in the collection, treatment, and disposal of hazardous waste. The cost of duplicating its asset base would cost more than $2 billion dollars and be extremely cost prohibitive to new entrants.

The company's recent equity offering provides the firm with $174 million in cash, which will be used to reduce debt, fund working capital, and finance accretive acquisitions. The company has identified more than 20 possible acquisition targets in its pipeline. Read more

Bears Say

North American hazardous waste volume continues to be flat to slightly down in terms of annual growth. Should waste-reduction initiatives or the general trend of companies relocating manufacturing plants overseas create a supply/demand imbalance, pricing could take a hit.

There may be a limit as to how much hazardous waste pricing could improve. Disposal-focused competitors, such as American Ecology ECOL, could undercut Clean Harbors in order to drive landfill volume. Furthermore, customers who opted to outsource their hazardous waste services to Clean Harbors could reopen their in-house incinerators if prices are raised too much. Read more

Strategy

To achieve its growth forecasts, Clean Harbors plans to add 50,000 tons of incineration capacity in the next 18 months via opportunistic acquisitions--in addition to pursuing large projects to drive landfill and incinerator disposal volume. Read more

Management

Clean Harbors has an experienced management team led by CEO and chairman Alan McKim. McKim has more than 32 years of experience in the hazardous waste industry and his executive team boasts an average of 15 years in the industry. McKim founded the company in 1980 and has turned the company into one of the nation's largest hazardous waste companies. Read more

Profile

Clean Harbors is one of the nation's largest providers of environmental services and the largest operator of nonnuclear hazardous waste disposal services in North America. Read more

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