This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stock Under $10 that he thinks could potentially double or triple in the next 6 to 12-months. See what he's trading today with a 14-day FREE pass.

Greenberg: Clean Harbors Is Not Cleaning Up

Stocks in this article: CLH

It has become so unpredictable that Credit Suisse analyst Hamzah Mazari, who originally upgraded the stock in 2010, veered from the pack earlier this week and downgraded Clean Harbors to a Neutral. He called management's credibility with guidance "low," and said that as the company has become more cyclical, it faces "a higher risk of missing expectations." Anything short of that, he said, would require "flawless execution."

What Went Wrong?

In a nutshell: bad timing and even worse luck. If it weren't so serious, it could be considered a comedy of errors. (See our chronology of events for more.) Clean Harbors dove head first into the oil-and-gas industry, notably in shale areas, with a variety of services, just as natural gas prices were collapsing.

Source: U.S. Energy Information Administration

As gas prices fell, so did the demand for oil and the oil rig count in the U.S. -- and so did the need for Clean Harbor's services, which include oilfield related disposal and transportation. The company attempted to reposition itself in an effort to expand its customer base, moving into new oil producing regions -- from the Marcellus to Bakken -- looking for the kind of success it has had in Canada's oil sands.

Adding insult to injury, the Safety-Kleen acquisition was completed just as base oil prices tumbled. Base oil is the kind oil Safety-Kleen re-refines and sells. Typically it tracks crude. But just after the acquisition was announced there were three price declines in base oil, McKim says, "and when I talked to people at Safety-Kleen they said this was unprecedented. They said they had never seen it and that it will be temporary."

But the spread between crude and base oil, while narrowing a bit, remains wide. In retrospect, McKim says, "We bought Safety-Kleen and paid a lot of money and probably bought at the top. Who would've had a crystal ball on what would happen to the spread between crude and base oil."

McKim, who founded Clean Harbors 34 years ago, still believes the strategy will pay off. The company even bought another re-refiner recently, even though Chevron (CVX) is expanding its re-refining capacity.

Still, he said he sees margins improving, which they did last quarter, "because of the new markets we're going into."

As a silver lining of low natural gas prices, manufacturing in the U.S. is seeing a resurgence.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV

Markets

DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Our Tweets

Brokerage Partners

Top Rated Stocks Top Rated Funds Top Rated ETFs