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Waste Connections Downgraded to Hold on Macroeconomic Woes
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On May 30, Zacks Investment Research downgraded Waste Connections, Inc. (WCN - Free Report) to a Zacks Rank #3 (Hold). Going by the Zacks model, companies holding a Zacks Rank #3 have high chances of performing in line with the broader market in the quarters ahead.
Waste Connections has outperformed the Zacks categorized Waste Removal Services industry in the last three months with an average return of 8% compared with 0.93% gain for the latter. Waste Connections typically targets secondary and rural markets to garner a higher local market share, which would be difficult in more competitive urban markets. In certain niche markets like E&P waste treatment and disposal, early mover advantage in certain rural basins play a key role in improving market positioning and generating higher financial returns, given the limited availability of existing third-party-owned waste disposal alternatives. The company focuses on increasing market penetration and offering additional services to capitalize on future drilling opportunities in those areas. Waste Connections also aims to leverage its franchise-based platforms to expand customer base beyond the exclusive market territories. As customers are added in existing markets, revenue per routed truck rises, which in turn increases collection efficiencies and profitability.
With prime location of disposal sites within competitive markets, Waste Connections has optimal asset positioning to generate higher profitability. Given the importance of and costs associated with the transportation of waste to treatment and disposal sites, having disposal capacity proximate to the waste stream offer a competitive advantage and serve as a barrier to entry. An experienced management team, decentralized operating strategy and financial strength remain additional tailwinds.
However, the volatility in crude oil prices is expected to impair profitability and creditworthiness of Waste Connections and adversely affect the level of investment and linear feet drilled in the basins where it operates. Lower crude oil prices and high volatility may further impact the ability of E&P companies to access capital on economically advantageous terms. This, in turn, is likely to reduce the demand for its services, thereby affecting both its top line and bottom line.
On a P/E (TTM) basis, Waste Connections looks a bit overvalued compared with the benchmark S&P 500 index with respective tallies of 33.7x and 20.1x in the last three-month period. The stock is also currently trading at the higher range. This forces us to be somewhat cautious on the stock.
Republic Services has a long-term earnings growth expectation of 9.2%. It beat earnings estimates thrice in the trailing four quarters with a positive surprise of 3.6%.
CBIZ surpassed earnings estimates twice in the trailing four quarters with a positive surprise of 18.3%.
Publicis Groupe topped earnings estimates twice in the trailing four quarters with a stellar positive surprise of 227.8%.
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Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>
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Waste Connections Downgraded to Hold on Macroeconomic Woes
On May 30, Zacks Investment Research downgraded Waste Connections, Inc. (WCN - Free Report) to a Zacks Rank #3 (Hold). Going by the Zacks model, companies holding a Zacks Rank #3 have high chances of performing in line with the broader market in the quarters ahead.
Waste Connections has outperformed the Zacks categorized Waste Removal Services industry in the last three months with an average return of 8% compared with 0.93% gain for the latter. Waste Connections typically targets secondary and rural markets to garner a higher local market share, which would be difficult in more competitive urban markets. In certain niche markets like E&P waste treatment and disposal, early mover advantage in certain rural basins play a key role in improving market positioning and generating higher financial returns, given the limited availability of existing third-party-owned waste disposal alternatives. The company focuses on increasing market penetration and offering additional services to capitalize on future drilling opportunities in those areas. Waste Connections also aims to leverage its franchise-based platforms to expand customer base beyond the exclusive market territories. As customers are added in existing markets, revenue per routed truck rises, which in turn increases collection efficiencies and profitability.
With prime location of disposal sites within competitive markets, Waste Connections has optimal asset positioning to generate higher profitability. Given the importance of and costs associated with the transportation of waste to treatment and disposal sites, having disposal capacity proximate to the waste stream offer a competitive advantage and serve as a barrier to entry. An experienced management team, decentralized operating strategy and financial strength remain additional tailwinds.
However, the volatility in crude oil prices is expected to impair profitability and creditworthiness of Waste Connections and adversely affect the level of investment and linear feet drilled in the basins where it operates. Lower crude oil prices and high volatility may further impact the ability of E&P companies to access capital on economically advantageous terms. This, in turn, is likely to reduce the demand for its services, thereby affecting both its top line and bottom line.
On a P/E (TTM) basis, Waste Connections looks a bit overvalued compared with the benchmark S&P 500 index with respective tallies of 33.7x and 20.1x in the last three-month period. The stock is also currently trading at the higher range. This forces us to be somewhat cautious on the stock.
Stocks to Consider
Some better-ranked stocks in the industry include Republic Services, Inc. (RSG - Free Report) , CBIZ, Inc. (CBZ - Free Report) and Publicis Groupe S.A. (PUBGY - Free Report) , each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Republic Services has a long-term earnings growth expectation of 9.2%. It beat earnings estimates thrice in the trailing four quarters with a positive surprise of 3.6%.
CBIZ surpassed earnings estimates twice in the trailing four quarters with a positive surprise of 18.3%.
Publicis Groupe topped earnings estimates twice in the trailing four quarters with a stellar positive surprise of 227.8%.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>