For Immediate Release
Chicago, IL – December 8, 2020 – Today, Zacks Equity Research discusses Waste Management, including Republic Services, Inc. (
RSG Quick Quote RSG - Free Report) , Waste Management, Inc. ( WM Quick Quote WM - Free Report) and Clean Harbors, Inc. ( CLH Quick Quote CLH - Free Report) .
With proper disposal of medical waste being a major concern for several countries, especially amid the coronavirus outbreak, the Zacks
Waste Removal Services industry stands to benefit. 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, Waste Management and Clean Harbors are some stocks, which are likely to gain from the abovementioned trends. Industry Description
The Zacks Waste Removal Services industry comprises companies that 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.
3 Trends Shaping the Future of Waste Removal Services Industry 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 A Healthy Demand Environment: report, the global waste management market is expected to reach $2,339.8 billion by 2027 from $2,080 billion in 2019, witnessing a CAGR of 5.5% from 2020 to 2027. The coronavirus outbreak has necessitated the proper disposal of trash. In fact, waste management companies are at an advantage in situations such as the recent one, 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. Medical Waste Disposal Boosts Industry Prospects: Rising environmental concerns, rapid industrialization, economic growth and increase in population are expected to increase non-hazardous waste. This should enhance business opportunities for waste management companies. Increase in Non-Hazardous Waste: 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 #116. This rank places it in the top 46% of more than 250 Zacks industries.
Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth 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 Underperforms Sector and S&P 500
The Zacks Waste Removal Services industry has underperformed the broader Zacks Business Services sector as well as the Zacks S&P 500 composite over the past year.
The industry has declined 10.8% over this period compared with 5% decline of the broader sector. The Zacks S&P 500 composite has risen 18.2% in the said time frame.
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 11.11X compared with the S&P 500’s 16.53X and the sector’s 16.09X.
Over the past five years, the industry has traded as high as 12.43X, as low as 8.30X and at the median of 10.68X.
3 Waste Removal Services Stocks to Keep a Close Eye On
We are presenting three stocks that carry a Zacks Rank #1 (Strong Buy), #2 (Buy) or 3 (Hold). These stocks are well positioned to grow in the near term. You can see
the complete list of today’s Zacks #1 Rank stocks here. Clean Harbors: This Zacks Rank #1 Massachusetts-based company provides environmental, energy, 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. The company continues to make capital investments to enhance its quality and comply with government and local regulations. Acquisitions have been helping the company expand its business across multiple lines of services. Consistency in rewarding its shareholders through share buybacks boosts investor confidence and earnings per share.
Notably, cost-reduction efforts, productivity improvements, healthy mix of higher margin work and the two government-assistance programs have been aiding the company’s bottom line amid the COVID-19 pandemic. The company raised its full-year adjusted EBITDA guidance to the range of $530-$550 million from the previous guidance: $470-$500 million.
The Zacks Consensus Estimate for current-year EPS has improved 52.2% in the past 60 days. The stock has gained 9% over the past six months.
Republic Services: This Zacks Rank #2 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 average yield has been aiding the company’s top-line growth. The company 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.
The company continues to grow internally with the help of long-term contracts for the collection, recycling and disposal of solid waste materials. Consistency in dividend payments and share buybacks not only boost investor confidence but also positively impact earnings per share.
The Zacks Consensus Estimate for current-year EPS has improved 7.9% in the past 60 days. The stock has gained 6.5% over the past six months.
Waste Management: This Zacks Rank #3 Texas-based company provides waste management environmental services to residential, commercial, industrial, and municipal customers in North America.
Although many companies across diverse sectors suspended dividend payouts and share buybacks amid the coronavirus crisis, Waste Management Is one of the few continuing to reward shareholders. The company’s board of directors approved a dividend hike of 10.8%, reflecting its 10
th consecutive double-digit percentage increase since the initiation of dividend payment in 2010. The company paid out a dividend of $49 million in the last reported quarter.
Consistency in rewarding its shareholders through share buybacks and dividend payments boosts investor confidence and positively impacts earnings per share. Additionally, the company's focus on secondary and rural markets to garner a higher local market share is appreciable. The company has optimal asset positioning to generate higher profitability. Acquisitions act as a key growth catalyst.
The Zacks Consensus Estimate for current-year EPS has improved 3.4% in the past 60 days. The stock has gained 3.5% over the past six months.
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