Saturday, October 17, 2015

U.S. Ecology Earnings Preview (11/4)

U.S. Ecology closed this week at $46.39.  This price represents a 4% decrease over the last month, a 2.9% increase QTD, and a 15.6% increase YTD.  We entered this position at a price of $44.13 nearly one year ago, a 5% gain ITD.  ECOL is scheduled to report earnings on November 4th, the latest such date in our sector.  To recap the previous earnings release, UNP surprised the markets by posting revenue that more than doubled its previous quarter; the same held for operating income.  However, EPS only arrived at a disappointing $0.10, due entirely to a one-time good-will impairment. 

There is no reason U.S Ecology shouldn’t repeat this performance.  It is currently in the midst of numerous long-term contracts, and its backlog is strong and growing.  Its environmental service divisions are slated by management to have an unprecedented year.  In fact, management expects that, even despite the downward adjustment of Q2 EPS, ECOL will finish 2015 at the upper-end of its previously forecasted $1.76-1.92 EPS range.  Wall Street shares this opinion, predicting a consensus EPS of $0.66 this quarter.  Based on the contributions of six analysts, it has assigned an “overweight” rating to the equity—this matches the ratings from three months ago.  U.S. Ecology will pay its $0.18 dividend, as announced, on 10/19. 

U.S. Ecology still expresses confidence in the immediate benefits of its August divestiture of All-State Power Vac, completed in the hopes of streamlining operations.  In addition, just this past month, ECOL has been in the middle of a battle with Detroit taxpayers.  It had begun to expand operations at one of its waste treatment plants in the city, one that specializes in the detoxification of naturally-occurring radiation from fracking.  This plant even gained necessary state approval to begin treating greater quantities of waste from neighboring states.  However, in response to due diligence from a few journalists and the public, this will be halted.  This was a major project, but bearing in mind the history of safety at this plant, management expects the expansion to resume in the near future.  There has been little else in the way of company news.  

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