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"Trash" Stocks Riding on Waste Recycling Spree

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The world’s population is dashing toward a better and faster life. Ironically, urbanization and population growth have been key drivers of the less-glamorous waste management companies.

In a report from Allied Market Research, the global waste management market is projected to register a compounded annual growth rate (CAGR) of 6% between 2018 and 2025, to reach $530 billion. In fact, if we combine this projection with scarcity ingarbage dumping location and innumerable new technology offering collection and recycling solutions, the waste management space appears quite a promising.

Additionally, reports from the Frontier Group highlights that the U.S. population is equivalent to 4.27% of the total world population but the country alone generates 30% of the world's waste. This huge output of waste will give the waste industry higher income, with a boost to transportation and disposal. Per a report from ResearchandMarkets, the U.S. waste industry is predicted to reach $80.7 billion by 2023 at a CAGR of 11.14% compared to the present size of $52.9 billion.

Acquisitions Boost Waste Management Companies

Waste Management, Inc. (WM - Free Report) is one of America’s top waste management companies, with the largest network of recycling centers, landfills and transfer stations. On Apr 15, the company announced plans to acquire Advanced Disposal Services, Inc. (ADSW - Free Report) for $4.9 billion. Once this acquisition closes in the first quarter of 2020, Waste Management’s total number of customers will increase by 13.5%, along with 94 collection operations, 73 transfer stations, 41 landfills, and 22 owned and operated recycling facilities that Advanced Disposal currently possesses.

In fact, the space has seen several mergers and acquisitions this year across the global. On Dec 4, Thailand-based PET producer, Indorama Ventures acquired California-based Green Fiber International. Since 2018, Green Fiber has been a supplier of high-quality, recycled PET bottle flakes, with 88 million pounds of production per year.

In January, Indorama Ventures acquired Custom Polymers PET’s recycling facility in Alabama for about $30 million.

Additionally, private firms are constantly growing, and acquisition has been a prime facilitator. On Nov 20, GFL Environmental Inc. acquired AGI group of companies, including Ground Force Environmental, Robert Cooke Trucking and WasteAway Recycling Environmental. The acquisition gives GFL scope to expand and complements the existing liquid waste and soil remediation capabilities in Southwestern Ontario.

Collaboration to Drive Innovation  

As said earlier, innovation has been a driver of the waste management space. On Dec 4, automaker Ford Motor Company (F - Free Report) said that it will collaborate with fast-food giant McDonald's Corporation (MCD - Free Report) to convert coffee beans waste into vehicle parts, like headlamp housings after successfully turning soybean waste to soybean-based foam for seats and headliners in 2007.

Trash Stocks to Look Out For

Per a research report by Barron, “waste management business is capital intensive, highly regulated, provides an essential service, generates ample cash flow, and has the potential for small, tuck-in acquisitions that enhance existing networks.” Moreover, pricing and recycling-contract will definitely boost the industry.

Advanced Disposal Services is a Zacks Rank #1 (Strong Buy) company that provides non-hazardous solid waste collection, transfer, recycling and disposal services.

The company supplies commercial and industrial customers with waste containers and waste collection, transportation, and disposal services to construction and demolition sites.

Advanced Disposal’s expected earnings growth rate for the next year is 32.6% compared with the Waste Removal Services industry’s projected earnings growth of 11.96%. The Zacks Consensus Estimate for the company’s current-year earnings has advanced 7.5% over the past 60 days. Advanced Disposal has outperformed the industry in the past year (+24.1% versus +14%). You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Casella Waste Systems, Inc. (CWST - Free Report) is a Zacks Rank #3 (Hold) company that provides vertically integrated solid waste services that include solid waste collection and disposal, transfer, recycling, and organics services to residential, commercial, municipal, and industrial customers.

Casella also processes and markets recyclable metals, aluminum, plastics, and paper and corrugated cardboard.

The company’s expected earnings growth rate for the current quarter is more than 100% compared with the Pollution Control industry’s projected earnings growth of 42.5%. The Zacks Consensus Estimate for the company’s current-year earnings has advanced 2.4% over the past 60 days. Casella Waste has outperformed the industry in the past year (+43% versus +20.5%).

 

Republic Services, Inc. (RSG - Free Report) is a Zacks Rank #3 company that 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 company is also engaged in processing and sale of old corrugated containers, old newsprint, aluminum, glass, and other materials; temporary waste and recycling collection services; and provision of landfill services.

Republic Services’ expected earnings growth rate for the current year is 6.2% compared with the Waste Removal Services industry’s projected earnings growth of 3.2%. The Zacks Consensus Estimate for the company’s current-year earnings has advanced 1.2% over the past 60 days. Republic Services has outperformed the industry in the past year (+16.5% versus +14.4%).

 

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