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3 Stocks to Watch Out For From the Prospering Waste Management Industry
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With proper disposal of medical waste being a major concern for several countries across the globe amid the coronavirus outbreak, the Zacks Waste Removal Services industry stands to benefit from the current scenario. Government initiatives for sustainable waste management, increasing environmental awareness, rising population, rapid industrialization and urbanization, and growing adoption of advanced waste collection solutions are the other positives for the space.
Waste Management, Inc. (WM - Free Report) , Republic Services, Inc. (RSG - Free Report) and Clean Harbors, Inc. (CLH - Free Report) are some stocks that are likely to gain from the abovementioned factors.
Industry Description
The Zacks Waste Removal Services industry comprises companies, which are engaged in the collection, transportation, treatment, disposal, inspection and regulation of any form of waste. The companies serve residential, municipal, commercial and industrial customers in the United States and internationally. Some industry participants provide non-hazardous solid waste collection, transfer, recycling, disposal, and energy services for small-container, large-container, municipal and residential, and energy services customers in the United States and Puerto Rico while others provide waste management environmental services to residential, commercial, industrial, and municipal customers in North America.
3 Trends Shaping the Future of Waste Removal Services Industry
A Healthy Demand Environment: The industry is mature with growth coming from volume and price increases. Income and cash flow have grown steadily over the past few years, enabling most industry players to pursue acquisitions and other investments. Per a report, the global waste management market is expected to reach $542.7 billion by 2026 from $423.4 billion in 2021, witnessing a CAGR of 5.1%.
Medical Waste Disposal Boosts Industry Prospects: The coronavirus outbreak has necessitated the proper disposal of trash. In fact, waste management companies are at an advantage in situations such as this, as healthcare officials have to dispose of used masks, gloves, suits, syringes and other medical equipment properly to curb the spread of infection. Government initiatives as well as stringent rules and regulations to advance sustainable waste management mechanisms and put a check on illegal dumping are also expected to boost the industry.
Increase in Non-hazardous Waste: Increase in population, industrialization and urbanization will remain key drivers of the industry as it prompts significant rise in garbage and recycling. Also, technology adoption, and use of advanced collection and recycling solutions are expected to pick up pace. This should enhance business opportunities for waste management companies.
Zacks Industry Rank Indicates Encouraging Prospects
The Zacks Waste Removal Services industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #110. This rank places it in the top 43% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that investors can buy or retain given their growth prospects, let’s take a look at the industry’s recent stock market performance and current valuation.
Industry's Performance
The Zacks Waste Removal Services industry has outperformed the broader Zacks Business Services sector but has underperformed the Zacks S&P 500 composite over the past year.
The industry has gained 13.6% over this period against 20.8% decline of the broader sector. The Zacks S&P 500 composite has risen 30.9% in the said time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is commonly used for valuing waste removal services stocks because of their high debt levels, the industry is currently trading at 11.23X compared with the S&P 500’s 15.82X and the sector’s 17.58X.
Over the past five years, the industry has traded as high as 12.60X, as low as 8.38X and at the median of 11.13X, as the charts below show.
EV/EBITDA Ratio
3 Waste Removal Services Stocks to Keep a Close Eye On
Republic Services:This Zacks Rank #2 (Buy) Arizona-based company provides non-hazardous solid waste collection, transfer, recycling, disposal, and energy services for small-container, large-container, municipal and residential, and energy services customers in the United States and Puerto Rico.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The positive impact of acquisitions and average yield has been aiding the company’s top-line growth. Republic Services is focused on increasing its operational efficiency by shifting to compressed natural gas collection vehicles and converting rear-loading trucks to automated-side loaders to reduce costs and improve profitability. Consistency in dividend payments and share buybacks boost investor confidence and positively impact earnings per share. Notably, the company’s board of directors declared a dividend hike of 8.2% to 46 cents per share. The hiked dividend will be paid out on Oct 15 to stockholders of record as of Oct 1. Republic Services raised its 2021 adjusted EPS and adjusted free cash flow guidance. Adjusted EPS is now expected between $4.00 and $4.05 compared with the prior guidance of $3.74 and $3.79. The company now expects to generate $1.45 billion to $1.475 billion of adjusted free cash flow compared with the prior guidance of $1.35 billion to $1.40 billion.
The Zacks Consensus Estimate for current-year EPS has improved 5.8% in the past 90 days. The stock has gained 34.1% over the past year.
Price & Consensus: RSG
Waste Management: This Zacks Rank #3 (Hold) Texas-based company provides waste management environmental services to residential, commercial, industrial, and municipal customers in North America.
Amid the coronavirus crisis, the company’s top line has been benefiting from acquisition revenues and growth from yield.Consistency in rewarding its shareholders through share buybacks and dividend payments boosts investor confidence and positively impact earnings per share. The company has optimal asset positioning to generate higher profitability. Acquisitions act as a key growth catalyst. Waste Management has raised its outlook for 2021. Total revenue growth is now expected to be in the range of 15.5% to 16% compared with the prior growth rate of 12.5% to 13%. Combined internal revenue growth from yield and volume in the collection and disposal business is expected to be 5.5% or higher. The growth rate was earlier expected to be 4.5% or higher. Adjusted operating EBITDA is now expected to be between $5 billion and $5.1 billion compared with the prior-guided range of $4.875-$4.975 billion. Free cash flow is now estimated to be between $2.5 billion and $2.6 billion compared with the prior-guided range of $2.325-$2.425 billion.
The Zacks Consensus Estimate for current-year EPS has improved 2.7% in the past 90 days. The stock has gained 35.9% over the past year.
Price & Consensus: WM
Clean Harbors: This Zacks Rank #3 Massachusetts-based company provides environmental, and industrial services in North America.
The company is focused on improving its efficiency and lowering operating costs through enhanced technology, process efficiencies and stringent cost management. Acquisitions have been helping the company expand its business across multiple lines of services. Notably, cost-reduction efforts, productivity improvements, healthy mix of higher margin work have been aiding Clean Harbors’ bottom line amid the COVID-19 pandemic.
Also, Clean Harbors has raised its guidance for the full year. Adjusted EBITDA is now anticipated between $620 million and $650 million compared with the prior-guided range of $560-$600 million. Net income is now anticipated between $159 million and $193 million, compared with the prior-guided range of $116-$157 million. Adjusted free cash flow is now expected between $285 million and $315 million, compared with the prior-guided range of $230-$270 million. Net cash from operating activities is now projected between $475 million and $525 million, compared with the prior-guided range of $415-$475 million.
The Zacks Consensus Estimate for current-year EPS has improved 28.5% in the past 90 days. The stock has gained 64.8% over the past year.
Price & Consensus: CLH
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3 Stocks to Watch Out For From the Prospering Waste Management Industry
With proper disposal of medical waste being a major concern for several countries across the globe amid the coronavirus outbreak, the Zacks Waste Removal Services industry stands to benefit from the current scenario. Government initiatives for sustainable waste management, increasing environmental awareness, rising population, rapid industrialization and urbanization, and growing adoption of advanced waste collection solutions are the other positives for the space.
Waste Management, Inc. (WM - Free Report) , Republic Services, Inc. (RSG - Free Report) and Clean Harbors, Inc. (CLH - Free Report) are some stocks that are likely to gain from the abovementioned factors.
Industry Description
The Zacks Waste Removal Services industry comprises companies, which are engaged in the collection, transportation, treatment, disposal, inspection and regulation of any form of waste. The companies serve residential, municipal, commercial and industrial customers in the United States and internationally. Some industry participants provide non-hazardous solid waste collection, transfer, recycling, disposal, and energy services for small-container, large-container, municipal and residential, and energy services customers in the United States and Puerto Rico while others provide waste management environmental services to residential, commercial, industrial, and municipal customers in North America.
3 Trends Shaping the Future of Waste Removal Services Industry
A Healthy Demand Environment: The industry is mature with growth coming from volume and price increases. Income and cash flow have grown steadily over the past few years, enabling most industry players to pursue acquisitions and other investments. Per a report, the global waste management market is expected to reach $542.7 billion by 2026 from $423.4 billion in 2021, witnessing a CAGR of 5.1%.
Medical Waste Disposal Boosts Industry Prospects: The coronavirus outbreak has necessitated the proper disposal of trash. In fact, waste management companies are at an advantage in situations such as this, as healthcare officials have to dispose of used masks, gloves, suits, syringes and other medical equipment properly to curb the spread of infection. Government initiatives as well as stringent rules and regulations to advance sustainable waste management mechanisms and put a check on illegal dumping are also expected to boost the industry.
Increase in Non-hazardous Waste: Increase in population, industrialization and urbanization will remain key drivers of the industry as it prompts significant rise in garbage and recycling. Also, technology adoption, and use of advanced collection and recycling solutions are expected to pick up pace. This should enhance business opportunities for waste management companies.
Zacks Industry Rank Indicates Encouraging Prospects
The Zacks Waste Removal Services industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #110. This rank places it in the top 43% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that investors can buy or retain given their growth prospects, let’s take a look at the industry’s recent stock market performance and current valuation.
Industry's Performance
The Zacks Waste Removal Services industry has outperformed the broader Zacks Business Services sector but has underperformed the Zacks S&P 500 composite over the past year.
The industry has gained 13.6% over this period against 20.8% decline of the broader sector. The Zacks S&P 500 composite has risen 30.9% in the said time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is commonly used for valuing waste removal services stocks because of their high debt levels, the industry is currently trading at 11.23X compared with the S&P 500’s 15.82X and the sector’s 17.58X.
Over the past five years, the industry has traded as high as 12.60X, as low as 8.38X and at the median of 11.13X, as the charts below show.
EV/EBITDA Ratio
3 Waste Removal Services Stocks to Keep a Close Eye On
Republic Services:This Zacks Rank #2 (Buy) Arizona-based company provides non-hazardous solid waste collection, transfer, recycling, disposal, and energy services for small-container, large-container, municipal and residential, and energy services customers in the United States and Puerto Rico.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The positive impact of acquisitions and average yield has been aiding the company’s top-line growth. Republic Services is focused on increasing its operational efficiency by shifting to compressed natural gas collection vehicles and converting rear-loading trucks to automated-side loaders to reduce costs and improve profitability. Consistency in dividend payments and share buybacks boost investor confidence and positively impact earnings per share. Notably, the company’s board of directors declared a dividend hike of 8.2% to 46 cents per share. The hiked dividend will be paid out on Oct 15 to stockholders of record as of Oct 1. Republic Services raised its 2021 adjusted EPS and adjusted free cash flow guidance. Adjusted EPS is now expected between $4.00 and $4.05 compared with the prior guidance of $3.74 and $3.79. The company now expects to generate $1.45 billion to $1.475 billion of adjusted free cash flow compared with the prior guidance of $1.35 billion to $1.40 billion.
The Zacks Consensus Estimate for current-year EPS has improved 5.8% in the past 90 days. The stock has gained 34.1% over the past year.
Price & Consensus: RSG
Waste Management: This Zacks Rank #3 (Hold) Texas-based company provides waste management environmental services to residential, commercial, industrial, and municipal customers in North America.
Amid the coronavirus crisis, the company’s top line has been benefiting from acquisition revenues and growth from yield.Consistency in rewarding its shareholders through share buybacks and dividend payments boosts investor confidence and positively impact earnings per share. The company has optimal asset positioning to generate higher profitability. Acquisitions act as a key growth catalyst. Waste Management has raised its outlook for 2021. Total revenue growth is now expected to be in the range of 15.5% to 16% compared with the prior growth rate of 12.5% to 13%. Combined internal revenue growth from yield and volume in the collection and disposal business is expected to be 5.5% or higher. The growth rate was earlier expected to be 4.5% or higher. Adjusted operating EBITDA is now expected to be between $5 billion and $5.1 billion compared with the prior-guided range of $4.875-$4.975 billion. Free cash flow is now estimated to be between $2.5 billion and $2.6 billion compared with the prior-guided range of $2.325-$2.425 billion.
The Zacks Consensus Estimate for current-year EPS has improved 2.7% in the past 90 days. The stock has gained 35.9% over the past year.
Clean Harbors: This Zacks Rank #3 Massachusetts-based company provides environmental, and industrial services in North America.
The company is focused on improving its efficiency and lowering operating costs through enhanced technology, process efficiencies and stringent cost management. Acquisitions have been helping the company expand its business across multiple lines of services. Notably, cost-reduction efforts, productivity improvements, healthy mix of higher margin work have been aiding Clean Harbors’ bottom line amid the COVID-19 pandemic.
Also, Clean Harbors has raised its guidance for the full year. Adjusted EBITDA is now anticipated between $620 million and $650 million compared with the prior-guided range of $560-$600 million. Net income is now anticipated between $159 million and $193 million, compared with the prior-guided range of $116-$157 million. Adjusted free cash flow is now expected between $285 million and $315 million, compared with the prior-guided range of $230-$270 million. Net cash from operating activities is now projected between $475 million and $525 million, compared with the prior-guided range of $415-$475 million.
The Zacks Consensus Estimate for current-year EPS has improved 28.5% in the past 90 days. The stock has gained 64.8% over the past year.
Price & Consensus: CLH