Thursday, March 5, 2015

US Ecology 2014 Q4 Earnings Release

On Friday February 27th, US Ecology reported their Q4 and fiscal year earnings. During Q4, US Ecology reported strong earnings as they delivered a quarterly revenue of $157.2 million up 164% from last year and operating income of $19.1 million up 24% from last year. This boost in revenue was primarily caused by the progress made in the integration process of The Environmental Quality Company (EQ) which US Ecology acquired last June. So far they are on schedule and predict that they have 14 months left in the integration process since it is scheduled to take two years. Overall, for their fiscal year earnings, US Ecology posted a revenue of $447.4 million, up 122% from last year and a net income of $38.2 million, up 37% from last year. Although yearly EPS missed consensus by $0.02, there is positive outlook going into 2015 for US Ecology.
Major changes are occurring within US Ecology that are poised to ignite growth in the future. Recently, US Ecology has restructured its operational segments. Now, US Ecology operates in two segments: Environmental Services (ES) Segment and Field and Industrial Services (FIS) Segment. The ES segment consists of all the US Ecology operations and Legacy EQ treatment and disposal facilities and currently accounts for 70% of US Ecology’s revenue. It primarily provides hazardous and non-hazardous materials management services including waste disposal, treatment, recycling, and transportation at company-owned treatment and disposal facilities. The Field and Industrial Services  segment consist of all Legacy EQ field and industrial services business and currently accounts for 30% of US Ecology’s revenue. Services include waste packaging, collection and total waste management solutions. Together these segments form the new US Ecology.
Management seems to be quite optimistic going into 2015. They project the revenue is going to reach $585 - $620 million next year up % from 2014. Furthermore, they expect their ES segment to account for 60% of that ($345 - $370 million) and their FIS segment may account for 40% ($240 - $250 million). Also, management believes that EPS will be around $1.76 - $1.92 in 2015. A major change will occur in US Ecology’s interest expense as their interest hedge program has begun on December 31st, 2014. This program is designed to make 63% of their debt be paid off at 5.2% interest. In addition, US Ecology expects tax rates to increase to around 39% up from 37.4% in 2014 because of increased profits in the US and higher state income taxes. Finally, capital expenditure is set to increase to $40 - $45 million in 2015 as US Ecology did not spend as much as they expected in 2014. In 2015, US Ecology plans on using this capital on land-fill development, infrastructure upgrades and equipment replacement of their operational facilities.

                Overall, US Ecology posted better than expected results during 2014. The key initiative they have for next year is to continue the integration of EQ into the company. Already 8 months into the 2 year process and the company has been right on schedule. Going into 2015, US Ecology will definitely have solid growth as it continues to provide effective waste management services. 

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