Clean Harbors Delivers Mixed Q1 Results: EPS Beats, Revenue Misses, But Long-Term Momentum Remains

Clean Harbors (NYSE: CLH) reported its first-quarter 2025 results, showcasing a nuanced performance: GAAP EPS of $1.09 beat estimates by $0.01, while revenue of $1.43 billion fell short of expectations by $20 million ($1.45 billion consensus). The mixed outcome highlights both operational resilience and near-term challenges, but management reaffirmed its full-year guidance, signaling confidence in long-term growth drivers.

EPS Beat Driven by Margin Discipline and Strategic Acquisitions

The company’s adjusted EPS of $1.09 outperformed expectations, driven by:
1. Margin Expansion: Adjusted EBITDA rose 2% year-over-year to $234.9 million, with margins holding steady at 16.4%. Cost-cutting in the Safety-Kleen Sustainability Solutions (SKSS) segment and higher incineration pricing (+5% mix-adjusted) bolstered profitability.
2. Acquisition Synergies: The HEPACO acquisition boosted Field Services revenue by 32%, while the Kimball incinerator’s 88% utilization rate (up from 79% in 2024) underscored operational efficiency.

Revenue Miss: Weather and Refinery Delays Weighed

The $20 million revenue shortfall stemmed from:
- Weather Disruptions: Co-CEO Eric Gerstenberg noted that unfavorable weather early in the quarter delayed project timelines, particularly in the Environmental Services (ES) segment.
- Industrial Services Slump: The ES segment’s Industrial Services division saw a 10% year-over-year revenue decline due to refinery customers delaying maintenance and spending.
- SKSS Challenges: While Safety-Kleen’s revenue rose 9% to $224.8 million, weak demand in the U.S. base oil market and pricing pressures limited upside.

Segment Performance: Strengths and Weaknesses

1. Environmental Services (ES):
2. Total Revenue: $1.21 billion (+3% YoY), driven by HEPACO and Technical Services growth.

3. Incineration Gains: Higher utilization and pricing offset refinery delays.

4. Safety-Kleen Sustainability Solutions (SKSS):

5. Volume Growth: The Noble Oil acquisition and shifts to higher-margin “charge-for-oil” pricing models boosted results.
6. Cost Controls: SKSS reduced collection costs by 12%, mitigating base oil market headwinds.

Management Outlook: Guidance Reaffirmed Amid Tailwinds

Despite the Q1 miss, Clean Harbors maintained its full-year 2025 targets:
- Adjusted EBITDA: $1.15–$1.21 billion (+6% YoY).
- Free Cash Flow: $430–$490 million (+30% YoY).

CEO Mike Battles emphasized long-term opportunities:
- The Kimball incinerator’s full ramp-up will add $50 million annually in EBITDA.
- PFAS remediation projects are expected to contribute $100 million+ in revenue by 2026.
- A $118.7 million capital expenditure push (including the Phoenix Hub initiative) positions the company for future growth.

Risks and Challenges

• Macroeconomic Uncertainty: Trade policy risks and refinery spending delays could persist.
• Commodity Pricing: Weak base oil markets may continue to pressure SKSS margins.
• Weather Volatility: Unpredictable weather patterns could disrupt operations in future quarters.

Investment Implications

• Valuation: At $212.63 per share (vs. a $250.93 average analyst target), CLH trades at 19.6x forward P/E, below its five-year average of 22x. The stock’s 1.8% dividend yield adds further appeal.
• Balance Sheet: Net debt of $1.2 billion (versus $1.0 billion at year-end) is manageable, with a conservative leverage ratio of 2.1x EBITDA.

Conclusion: A Stock for the Long Run

While Q1’s revenue miss highlights near-term execution risks, Clean Harbors’ strong adjusted EPS beat, margin resilience, and reaffirmed guidance suggest the company remains on track to capitalize on long-term trends in environmental services. Key positives include:
- Strategic Acquisitions: HEPACO and Kimball are delivering incremental growth.
- Demand Stability: Incineration utilization and PFAS remediation demand remain robust.
- Balance Sheet Strength: $489 million in cash and disciplined capital allocation support future initiatives.

Investors should view the Q1 miss as a temporary setback, not a structural issue. With a $310 billion market cap and a backlog of projects worth $2.5 billion, Clean Harbors is positioned to grow earnings by 6–8% annually through 2025. For patient investors, the stock offers a compelling risk-reward profile, particularly if shares remain undervalued relative to peers.

Final Take: Hold or Buy CLH for its dominant market position and long-term growth catalysts, but monitor near-term refinery spending and commodity price trends closely.