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RSG or WCN: Which Stock is Better Placed Post Q3 Earnings?
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The waste management market is likely to gain traction backed by rise in population, increase in environmental awareness, and rapid industrialization and urbanization.
Strict government restrictions to limit landfills and steps to increase the collection of waste for recycling are also expected to create opportunities for the industry.
Per a report, the global waste management industry is projected to reach $435 billion by 2023, witnessing a CAGR of 6.2% from 2017 to 2023. The buoyancy in the waste management space is further confirmed by its Zacks Industry Rank in the top 14% (36 out of the 250 plus groups).
Given this backdrop, it is not a bad idea to undertake a comparative analysis of two waste removal services stocks — Republic Services Inc. (RSG - Free Report) and Waste Connections, Inc. (WCN - Free Report) . While Republic Services’ market cap is $24.24 billion, Waste Connections has a market capitalization of $19.99 billion.
Both the stocks are part of the broader Business Services sector (one of the 16 Zacks sectors) and have reported better-than-expected third-quarter 2018 results with year-over-year earnings and revenue growth.
Republic Services clearly scores over Waste Connections in terms of price performance. So far this year, shares of Republic Services have gained 11.8%, outperforming the 4.5% rise of the industry it belongs to. Waste Connections has returned 8.5% in the same time frame.
Earnings Expectations
Earnings growth along with stock price gains is often an indication of a company’s strong prospects.
Republic Services’ fourth-quarter earnings are projected to grow 27.9% compared with 17.3% for Waste Connections. Looking at the full-year 2018 picture, Republic Services’ earnings are projected to grow 25.9% while that of Waste Connections are expected to increase 16.2%.
Thus, Republic Services has an edge over Waste Connections in terms of quarterly and yearly projected earnings growth.
Earnings Surprise History
The earnings surprise history of a stock helps investors have an idea of the stock’s performance in the previous quarters.
Both Republic Services and Waste Connections have an impressive earnings surprise history, with their bottom line surpassing the Zacks Consensus Estimate in three of the previous four quarters.
However, Republic Services delivered higher average positive earnings surprise of 3.9% compared with 2.7% for Waste Connections.
Earnings Estimate Revisions
The direction of estimate revisions serves as an important pointer when it comes to the price of a stock.
Based on fourth-quarter and full-year earnings estimate revisions in the past 60 days, Republic Services is better placed. The Zacks Consensus Estimate for fourth-quarter 2018 earnings has increased 2.6% for Republic Services compared with an increase of 1.7% for Waste Connections. For 2018, estimates for Republic Services and Waste Connections have increased 0.7% and 0.4%, respectively.
Net Margin
Net profit margin helps investors evaluate a company’s business model in terms of pricing policy, cost structure and operating efficiency, and shows how good it is at converting revenues into profits. Hence, a strong net profit margin is preferred by all classes of investors.
Republic Services’ TTM net margin of 13.9% is in line with the industry’s figure. Waste Connections’ TTM net margin of 15.1% places it favorably compared with the industry as well as Republic Services.
Valuation
EV/EBITDA is a commonly used multiple for the waste management industry. We observe that while Republic Services and Waste Connections have EV/EBITDA ratios of 13.5 and 17.2, respectively, the industry’s figure stands at 12.1. Although both the companies compare unfavorably with the industry, Republic Services has a lower EV/EBITDA value than Waste Connections.
So, in terms of aggregate valuation, Republic Services is undervalued compared to Waste Connections.
Bottom Line
Our comparative analysis shows that Republic Services scores over Waste Connections in terms of price performance, earnings estimate revisions, earnings surprise history and quarterly and yearly projected earnings growth. Waste Connections has an edge in terms of net margin.
Despite a faster share price rally year to date, Republic Services is cheaper than Waste Connections.
Stocks to Consider
A few better-ranked stocks in the broader Business Services sector include Paychex, Inc (PAYX - Free Report) , Genpact Limited (G - Free Report) and WEX Inc (WEX - Free Report) , each carrying a Zacks Rank #2 (Buy). The long-term expected EPS (three to five years) growth rate for Paychex, Genpact and WEX is 8.5%, 10% and 15%, respectively.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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RSG or WCN: Which Stock is Better Placed Post Q3 Earnings?
The waste management market is likely to gain traction backed by rise in population, increase in environmental awareness, and rapid industrialization and urbanization.
Strict government restrictions to limit landfills and steps to increase the collection of waste for recycling are also expected to create opportunities for the industry.
Per a report, the global waste management industry is projected to reach $435 billion by 2023, witnessing a CAGR of 6.2% from 2017 to 2023. The buoyancy in the waste management space is further confirmed by its Zacks Industry Rank in the top 14% (36 out of the 250 plus groups).
Given this backdrop, it is not a bad idea to undertake a comparative analysis of two waste removal services stocks — Republic Services Inc. (RSG - Free Report) and Waste Connections, Inc. (WCN - Free Report) . While Republic Services’ market cap is $24.24 billion, Waste Connections has a market capitalization of $19.99 billion.
Both the stocks are part of the broader Business Services sector (one of the 16 Zacks sectors) and have reported better-than-expected third-quarter 2018 results with year-over-year earnings and revenue growth.
Since both the stocks carry a Zacks Rank #3 (Hold), we are using certain other parameters to give investors a better insight. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price Performance
Republic Services clearly scores over Waste Connections in terms of price performance. So far this year, shares of Republic Services have gained 11.8%, outperforming the 4.5% rise of the industry it belongs to. Waste Connections has returned 8.5% in the same time frame.
Earnings Expectations
Earnings growth along with stock price gains is often an indication of a company’s strong prospects.
Republic Services’ fourth-quarter earnings are projected to grow 27.9% compared with 17.3% for Waste Connections. Looking at the full-year 2018 picture, Republic Services’ earnings are projected to grow 25.9% while that of Waste Connections are expected to increase 16.2%.
Thus, Republic Services has an edge over Waste Connections in terms of quarterly and yearly projected earnings growth.
Earnings Surprise History
The earnings surprise history of a stock helps investors have an idea of the stock’s performance in the previous quarters.
Both Republic Services and Waste Connections have an impressive earnings surprise history, with their bottom line surpassing the Zacks Consensus Estimate in three of the previous four quarters.
However, Republic Services delivered higher average positive earnings surprise of 3.9% compared with 2.7% for Waste Connections.
Earnings Estimate Revisions
The direction of estimate revisions serves as an important pointer when it comes to the price of a stock.
Based on fourth-quarter and full-year earnings estimate revisions in the past 60 days, Republic Services is better placed. The Zacks Consensus Estimate for fourth-quarter 2018 earnings has increased 2.6% for Republic Services compared with an increase of 1.7% for Waste Connections. For 2018, estimates for Republic Services and Waste Connections have increased 0.7% and 0.4%, respectively.
Net Margin
Net profit margin helps investors evaluate a company’s business model in terms of pricing policy, cost structure and operating efficiency, and shows how good it is at converting revenues into profits. Hence, a strong net profit margin is preferred by all classes of investors.
Republic Services’ TTM net margin of 13.9% is in line with the industry’s figure. Waste Connections’ TTM net margin of 15.1% places it favorably compared with the industry as well as Republic Services.
Valuation
EV/EBITDA is a commonly used multiple for the waste management industry. We observe that while Republic Services and Waste Connections have EV/EBITDA ratios of 13.5 and 17.2, respectively, the industry’s figure stands at 12.1. Although both the companies compare unfavorably with the industry, Republic Services has a lower EV/EBITDA value than Waste Connections.
So, in terms of aggregate valuation, Republic Services is undervalued compared to Waste Connections.
Bottom Line
Our comparative analysis shows that Republic Services scores over Waste Connections in terms of price performance, earnings estimate revisions, earnings surprise history and quarterly and yearly projected earnings growth. Waste Connections has an edge in terms of net margin.
Despite a faster share price rally year to date, Republic Services is cheaper than Waste Connections.
Stocks to Consider
A few better-ranked stocks in the broader Business Services sector include Paychex, Inc (PAYX - Free Report) , Genpact Limited (G - Free Report) and WEX Inc (WEX - Free Report) , each carrying a Zacks Rank #2 (Buy). The long-term expected EPS (three to five years) growth rate for Paychex, Genpact and WEX is 8.5%, 10% and 15%, respectively.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>