Thursday, November 6, 2014

US Ecology Q3 Earnings

          US Ecology reported their Q3'14 earnings yesterday after the market closed.  Their top line was reported at $170.9 million which beat estimates of $157.8 million.  Their earnings per share was reported at $.65 compared to estimates of $.48.  Their robust earnings were led by growth within landfill volumes in the legacy business and double digit growth within their base business. In addition revenue realized from the Environmental Quality Company was around $111.3 million which was stronger than expected.  This was primarily driven by strong treatment and disposal volumes received. 

         The revenues and earnings per share beat my estimates of around $150 million and $.50 respectively.  US Ecology increased their 2014 FY EPS guidance from 1.70-1.80 to 1.90 to 1.97 which is in line with what I had originally projected.  One of my investment thesis points was that the experience management team within US Ecology will help increase EQ's margins and overall drive growth within bottom line growth in which it did for the third quarter.   The integration within the two companies has been efficient and quicker than expected and therefore they are currently ahead of schedule.  The stock price was down about 163 basis points today, therefore I do not believe the market has yet to fully appreciate the strong guidance and success from US Ecology's Q3'14 earnings report.  The stock is currently trading around $46 and I re-iterate my price target of $58.21 and will continue to monitor margin improvement and the efficiency within the integration process. 

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