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Here's Why it is Worth Buying Casella Waste (CWST) Stock Now

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Casella Waste Systems, Inc. (CWST - Free Report) currently seems to be a smart choice for investors seeking exposure in the pollution control space. Solid fundamentals and positive revision in earnings estimates are reflective of healthy growth potential of the stock.

This Rutland, VT-based company currently sports a Zacks Rank #1 (Strong Buy). It belongs to the Zacks Pollution Control industry, currently placed in the top 43% (with Zacks Industry Rank #102) of more than 250 Zacks industries. Notably, the top 50% of the Zacks-ranked industries tend to outperform the bottom 50% by a factor of more than 2 to 1.

We believe that stringent government regulations, pollution-related risks and growing demand in emerging nations are aiding providers of pollution control equipment and services.

Below we discussed why investing in Casella Waste will be a smart choice.

Share Price Performance, Impressive Earnings Outlook: Market sentiments seem to be working in favor of Casella Waste over time. In the past year, the company’s share price has gained 52.7% compared with the industry’s growth of 19.8%. It is worth mentioning here that its shares have gained 8.6% since the release of first-quarter 2019 results on Apr 30, 2019.






For the year, the company predicts net income of $34-$38 million, higher than $6.4 million reported in 2018.

In the past 60 days, earnings estimates for 2019 and 2020 have been revised upward, reflecting positive sentiments about the company’s growth prospects. Currently, the Zacks Consensus Estimate for Casella Waste is pegged at 81 cents for 2019 and $1.00 for 2020, reflecting growth of 6.6% and 6.4% from the respective 60-day-ago figures.

Casella Waste Systems, Inc. Price and Consensus

 

Casella Waste Systems, Inc. Price and Consensus

Casella Waste Systems, Inc. price-consensus-chart | Casella Waste Systems, Inc. Quote

In addition, the company’s Earnings ESP (the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate) is +1.86% for 2019 and +0.50% for 2020. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Healthy Top-Line Prospects: In the first quarter of 2019, Casella Waste’s revenues grew 11% from the year-ago quarter. Results benefited from strengthening customer solutions, collection and recycling activities. Also, effective pricing (solid waste) programs and gains from acquired assets (explained below) boosted results.

For 2019, the company anticipates revenues of $710-$725 million, higher than $660.7 million generated in 2018.

The Zacks Consensus Estimate for Casella Waste’s revenues is pegged at $718.6 million for 2019 and $754.4 million for 2020, suggesting growth of 8.8% and 5% from the respective year-ago figures.

Buyouts: The company seems to favor acquisitions to fortify its product portfolio. Recently, it agreed to acquire solid waste assets from some subsidiaries of Republic Services, Inc. The to-be-acquired assets are based in Cheshire, MA, and Albany, NY. In June, the company announced that it purchased three solid waste businesses (engaged in hauling, transfer and recycling activities).

In the first quarter of 2019, Casella Waste spent $1.2 million on acquisitions while its investments in buyouts amounted to $19 million in 2018. Buyouts boosted its solid waste revenues by $11.9 million or 10.8%.

Long-Term Growth Targets: The company remains focused on increasing collection profitability, improving technological capabilities, investing in growth programs and growing landfill returns.

For the 2017-2021 timeframe, Casella Waste anticipates growing organic revenues by 3-4% annually. Spending on acquisitions or developments is predicted to be $20-$40 million every year while normalized free cash flow is estimated to increase 10-15% annually. Net leverage is estimated to be 3.0x to 3.25x.

Other Key Picks

Some other top-ranked stocks in the Zacks Industrial Products sector are Roper Technologies, Inc. (ROP - Free Report) , Energy Recovery, Inc. (ERII - Free Report) and Tetra Tech, Inc. (TTEK - Free Report) . While Roper currently flaunts a Zacks Rank #1, Energy Recovery and Tetra Tech carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for all these stocks have improved for the current year. Further, average earnings surprise for the last four quarters was a positive 8.43% for Roper, 225% for Energy Recovery and 8.22% for Tetra Tech.

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