Zacks’ waste disposal services industry is expected to benefit from the gradual resumption of business operations and the reopening of the economy, which has resulted in increased waste generation from the industrial and commercial sectors. Government initiatives for sustainable waste management, increased environmental awareness, increasing population, rapid industrialization and urbanization and increasing adoption of advanced waste collection solutions are the other positive aspects. .
Republic Services, Inc. (RSG – free report), Clean Ports, Inc. (HLC – free report) and Core & Main, Inc. (CNM – Free Report) are stocks that are likely to benefit from the aforementioned factors.
Description of the industry
The Zacks Waste Disposal Services industry includes 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 abroad. Some industry participants provide non-hazardous solid waste collection, transfer, recycling, disposal and energy services for small containers, large containers, municipalities and residences, as well as customers of energy services 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 also operate as infrastructure and environmental solutions companies, providing water treatment and recycling solutions.
What is shaping the future of the waste disposal service industry?
A healthy demand environment:The industry is mature, with growth coming from volume and price increases. Revenues have increased over the past few years, allowing most industry players to pursue acquisitions and other investments. According to a report, the global waste management market is expected to reach $2,483.0 billion by 2030 from $1,612.0 billion in 2020, growing at a CAGR of 3.4% from 2021 to 2030.
Medical Waste Disposal Drives Industry Outlook: The sudden increase in cases of Omicron variant COVID-19 has once again necessitated the proper disposal of waste. In fact, waste management companies have an advantage in situations like this because health officials need to properly dispose of used masks, gloves, coveralls, syringes, and other medical equipment to curb the spread of infection. Government initiatives along with strict rules and regulations to advance sustainable waste management mechanisms and control illegal dumping are also expected to boost the industry.
Increase in non-hazardous waste: Population increase, industrialization and urbanization are expected to remain the main drivers of the industry as they lead to a significant increase in waste and recycling. Additionally, technology adoption and use of advanced collection and recycling solutions are expected to accelerate. This should improve business opportunities for waste management companies.
Zacks’ Industry Rankings Show Encouraging Prospects
The Zacks Waste Disposal Services Industry, part of the larger Zacks Business Services sector, currently carries the Zacks Industry #97 ranking. This ranking places it in the top 38% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is essentially the average of the Zacks ranking of all member stocks, indicates a strong near-term outlook. Our research shows that the top 50% of industries ranked by Zacks outperform the bottom 50% by a factor of more than 2 to 1.
Before outlining a few stocks investors can buy or hold given their growth prospects, let’s take a look at the industry’s recent stock performance and current valuation.
The Zacks Waste Disposal Services industry has outperformed the broader Zacks Business Services sector, but has underperformed the Zacks S&P 500 composite over the past year.
The industry fell 22.3% over the period, compared with a 50.3% drop in the broader sector and a 0.4% drop in the Zacks S&P 500 composite.
Year-over-year price performance
Current industry assessment
Based on EV/EBITDA (Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization) ratio, which is commonly used to value stocks of waste removal services due to their level of leverage high, the sector is currently trading at 12.41X compared with the S&P 500’s 13.59X and the sector’s 18.76X.
Over the past five years, the industry has traded as low as 13.18X, as low as 8.42X and at the median of 11.55X, as seen in the charts below.
3 Waste Removal Service Stocks to Watch Out For
Core and main: This Missouri-based company, ranked #1 in Zacks (Strong Buy), distributes water, wastewater, storm drainage, and fire protection products and related services to municipalities, utility companies, and utilities. private water and professional contractors in the municipal, non-residential and residential sectors. markets in the United States.
Core & Main benefited from solid demand in each of its end markets, supported by continued growth in municipal water infrastructure spending, land and development growth due to continued housing demand, and a recovery in the non-residential construction market. Despite continued inflationary trends in many of its product lines due to supply chain constraints and product availability issues, the company has continued to float thanks to its reliable products and services. The company’s active M&A strategy has helped it expand into new geographies, access new product lines, consolidate existing market positions and add key talent. Additionally, higher net sales and cost control initiatives will likely boost margins.
The Zacks consensus estimate for Core & Main’s current-year EPS is up 4.9% over the past 90 days. Core & Main shares have appreciated 29.8% over the past year.
Pricing & Consensus: CNM
Clean ports: This Massachusetts-based company of Zacks Rank #2 (Buy) provides environmental and industrial services in North America.
Clean Harbors is focused on improving efficiency and reducing operating costs through improved technology, process efficiencies and tight cost management. It continues to make capital investments to improve the quality of its service and comply with government and local regulations. Buyouts help the company expand its business across multiple service lines. Regularity in the remuneration of its shareholders through share buybacks strengthens investor confidence and has a positive impact on earnings per share.
The Zacks consensus estimate for Clean Harbors year-to-date EPS is up 20.9% over the past 90 days. Clean Harbors stock has gained 25.3% over the past year.
Services of the Republic: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 homes and energy services in the United States. and Puerto Rico.
The positive impact of acquisitions and average performance contributed to the company’s revenue growth. Republic Services is focused on increasing operational efficiency by switching to compressed natural gas collection vehicles and converting rear-loading trucks to automated sideloaders to reduce costs and improve profitability. The regularity of dividend payments and share buybacks not only boosts investor confidence, but also has a positive impact on earnings per share.
Zacks’ consensus estimate for Republic Services’ current-year EPS improved 0.6% over the past 90 days. Republic Services stock has gained 20.8% over the past year.
Price and Consensus: RSG