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3 Waste Removal Services Stocks to Watch Amid Industry Challenges
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The Zacks Waste Removal Services industry stands to benefit from the gradual resumption of business activities and reopening of the economy, which have led to increased waste production from industrial and commercial sectors. 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.
Republic Services, Inc. (RSG - Free Report) , Clean Harbors, Inc. (CLH - Free Report) and Core & Main, Inc. (CNM - Free Report) are some stocks likely to gain from the abovementioned factors.
Industry Description
The Zacks Waste Removal Services industry comprises companies 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. Some industry players operate as environmental infrastructure and solutions companies, providing water handling and recycling solutions.
What's 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 has grown steadily over the past few years, enabling most industry players to pursue acquisitions and other investments.
The Uptick in Economic Activities Bodes Well:With the reopening of the economy and the resumption of business activities, waste generation is bound to increase, especially in industrial and commercial sectors. Despite the decline in COVID-19 cases, proper disposal of medical waste will always remain an utmost priority to curb the spread of infection. Increases in population, industrialization and urbanization should remain the key drivers of the industry as these lead to a significant rise in garbage and recycling. Also, the use of advanced collection and recycling solutions is expected to pick up pace. This should enhance business opportunities for waste management companies.
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.
High Operating Costs a Woe: Given that waste management is both a time-consuming and complex process, it requires higher capital and operating costs to manage waste collection vehicles, bins, and processing equipment along with a huge number of workers. Such high operational expenses are likely to keep the bottom line of the companies in this industrial cohort under pressure.
Zacks Industry Rank Indicates Gloomy Prospects
The Zacks Waste Removal Services industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #138. This rank places it in the bottom 45% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates dull 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.
Despite the cloudy prospects, we present a few stocks that investors can buy or retain given their sturdy potential. But before that let’s take a look at the industry’s recent stock market performance and its current valuation.
Industry's Performance
The Zacks Waste Removal Services industry has outperformed the broader Zacks Business Services sector and the Zacks S&P 500 composite over the past year.
The industry has declined 6.3% over this period compared with 35.6% decline of the broader sector and 11.7% decline of the Zacks S&P 500 composite.
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 13.99X compared with the S&P 500’s 12.4X and the sector’s 24.11X.
Over the past five years, the industry has traded as high as 14.82X, as low as 8.57X and at the median of 11.88X, as the charts below show.
EV/EBITDA Ratio
3 Waste Removal Services Stocks to Keep a Close Eye On
Core & Main: This Zacks Rank #2 (Buy) Missouri-based company distributes water, wastewater, storm drainage, and fire protection products and related services to municipalities, private water companies, and professional contractors in the municipal, non-residential, and residential end markets in the United States.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Core & Main has been benefiting from solid demand across each of its end markets, backed by continued growth in municipal water infrastructure spending, growth in land and development due to continued housing demand, and recovery in the non-residential construction market. Despite the ongoing inflationary trends across many of its product lines due to supply chain constraints and product availability challenges, the company kept floating through its reliable products and services. The company’s active M&A strategy has been helping it expand into new geographies, access new product lines, consolidate existing market positions and add key talent. In addition, higher net sales and cost-control initiatives will likely drive margins.
The Zacks Consensus Estimate for CNM 2022 EPS has moved up 15.5% in the past 90 days. CNM stock has declined 22% over the past year.
Price & Consensus: CNM
Clean Harbors: This Zacks Rank #2 Massachusetts-based company provides environmental, and industrial services in North America.
Clean Harbors focuses on improving its efficiency and lowering operating costs through enhanced technology, process efficiencies and stringent cost management. It continues to make capital investments to enhance its service quality and comply with government and local regulations. Buyouts help the company expand its business across multiple lines of services. Consistency in rewarding shareholders through share buybacks boosts investor confidence and positively impacts earnings per share.
The Zacks Consensus Estimate for CLH’s 2022 EPS has moved up 7.1% in the past 90 days. CLH stock has gained 17.6% over the past year.
Price & Consensus: CLH
Republic Services:This Zacks Rank #3 (Hold) 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.
The positive impact of acquisitions and internal growth 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 not only boost investor confidence but also positively impact earnings per share.
The Zacks Consensus Estimate for RSG’s 2022 EPS has improved 0.8% in the past 90 days. RSG stock has gained 2.7% over the past year.
Price & Consensus: RSG
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3 Waste Removal Services Stocks to Watch Amid Industry Challenges
The Zacks Waste Removal Services industry stands to benefit from the gradual resumption of business activities and reopening of the economy, which have led to increased waste production from industrial and commercial sectors. 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.
Republic Services, Inc. (RSG - Free Report) , Clean Harbors, Inc. (CLH - Free Report) and Core & Main, Inc. (CNM - Free Report) are some stocks likely to gain from the abovementioned factors.
Industry Description
The Zacks Waste Removal Services industry comprises companies 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. Some industry players operate as environmental infrastructure and solutions companies, providing water handling and recycling solutions.
What's 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 has grown steadily over the past few years, enabling most industry players to pursue acquisitions and other investments.
The Uptick in Economic Activities Bodes Well:With the reopening of the economy and the resumption of business activities, waste generation is bound to increase, especially in industrial and commercial sectors. Despite the decline in COVID-19 cases, proper disposal of medical waste will always remain an utmost priority to curb the spread of infection. Increases in population, industrialization and urbanization should remain the key drivers of the industry as these lead to a significant rise in garbage and recycling. Also, the use of advanced collection and recycling solutions is expected to pick up pace. This should enhance business opportunities for waste management companies.
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.
High Operating Costs a Woe: Given that waste management is both a time-consuming and complex process, it requires higher capital and operating costs to manage waste collection vehicles, bins, and processing equipment along with a huge number of workers. Such high operational expenses are likely to keep the bottom line of the companies in this industrial cohort under pressure.
Zacks Industry Rank Indicates Gloomy Prospects
The Zacks Waste Removal Services industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #138. This rank places it in the bottom 45% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates dull 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.
Despite the cloudy prospects, we present a few stocks that investors can buy or retain given their sturdy potential. But before that let’s take a look at the industry’s recent stock market performance and its current valuation.
Industry's Performance
The Zacks Waste Removal Services industry has outperformed the broader Zacks Business Services sector and the Zacks S&P 500 composite over the past year.
The industry has declined 6.3% over this period compared with 35.6% decline of the broader sector and 11.7% decline of the Zacks S&P 500 composite.
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 13.99X compared with the S&P 500’s 12.4X and the sector’s 24.11X.
Over the past five years, the industry has traded as high as 14.82X, as low as 8.57X and at the median of 11.88X, as the charts below show.
EV/EBITDA Ratio
3 Waste Removal Services Stocks to Keep a Close Eye On
Core & Main: This Zacks Rank #2 (Buy) Missouri-based company distributes water, wastewater, storm drainage, and fire protection products and related services to municipalities, private water companies, and professional contractors in the municipal, non-residential, and residential end markets in the United States.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Core & Main has been benefiting from solid demand across each of its end markets, backed by continued growth in municipal water infrastructure spending, growth in land and development due to continued housing demand, and recovery in the non-residential construction market. Despite the ongoing inflationary trends across many of its product lines due to supply chain constraints and product availability challenges, the company kept floating through its reliable products and services. The company’s active M&A strategy has been helping it expand into new geographies, access new product lines, consolidate existing market positions and add key talent. In addition, higher net sales and cost-control initiatives will likely drive margins.
The Zacks Consensus Estimate for CNM 2022 EPS has moved up 15.5% in the past 90 days. CNM stock has declined 22% over the past year.
Price & Consensus: CNM
Clean Harbors: This Zacks Rank #2 Massachusetts-based company provides environmental, and industrial services in North America.
Clean Harbors focuses on improving its efficiency and lowering operating costs through enhanced technology, process efficiencies and stringent cost management. It continues to make capital investments to enhance its service quality and comply with government and local regulations. Buyouts help the company expand its business across multiple lines of services. Consistency in rewarding shareholders through share buybacks boosts investor confidence and positively impacts earnings per share.
The Zacks Consensus Estimate for CLH’s 2022 EPS has moved up 7.1% in the past 90 days. CLH stock has gained 17.6% over the past year.
Price & Consensus: CLH
Republic Services:This Zacks Rank #3 (Hold) 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.
The positive impact of acquisitions and internal growth 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 not only boost investor confidence but also positively impact earnings per share.
The Zacks Consensus Estimate for RSG’s 2022 EPS has improved 0.8% in the past 90 days. RSG stock has gained 2.7% over the past year.
Price & Consensus: RSG