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3 Stocks to Watch From the Prospering Waste Management Industry

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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, Clean Harbors, Inc. CLH and Core & Main, Inc. CNM 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 also 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:T he industry is mature, with growth coming from volume and price increases. Income has grown over the past few years, enabling most industry players to pursue acquisitions and other investments. Per a report, the global waste management market is expected to reach $2,483.0 billion by 2030 from $1,612.0 billion in 2020, witnessing a CAGR of 3.4% from 2021 to 2030.

Medical Waste Disposal Boosts Industry Prospects: The sudden rise in COVID-19 cases from the Omicron variant has once again necessitated the proper disposal of trash. In fact, waste management companies are at an advantage in situations like this 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.

Increase in Non-hazardous Waste: Increase in population, industrialization and urbanization should remain the key drivers of the industry as it leads to a significant rise in garbage and recycling. Also, technological adoption, and the use of advanced collection and recycling solutions are expected to pick up pace. This should enhance business opportunities for waste management companies.

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 #97. This rank places it in the top 38% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates strong 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.

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's Performance

The Zacks Waste Removal Services industry has outperformed the broader Zacks Business Services sector but underperformed the Zacks S&P 500 composite over the past year.

The industry has declined 22.3% over this period compared with 50.3% decline of the broader sector and 0.4% 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 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 high as 13.18X, as low as 8.42X and at the median of 11.55X, as the charts below show.

EV/EBITDA Ratio

3 Waste Removal Services Stocks to Keep a Close Eye On

Core & Main: This Zacks Rank #1 (Strong 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 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 Core & Main’s current-year EPS has moved up 4.9% in the past 90 days. Core & Main’s shares have appreciated 29.8% over the past year.

Price & Consensus: CNM

Clean Harbors: This Zacks Rank #2 (Buy) 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 its shareholders through share buybacks boosts investor confidence and positively impacts earnings per share.

The Zacks Consensus Estimate for Clean Harbors’ current year EPS has moved up 20.9% in the past 90 days. Clean Harbors stock has gained 25.3% 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 average yield 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 Republic Services’ current-year EPS has improved 0.6% in the past 90 days. Republic Services stock has gained 20.8% over the past year.

Price & Consensus: RSG


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Republic Services, Inc. (RSG) : Free Stock Analysis Report

Clean Harbors, Inc. (CLH) : Free Stock Analysis Report

Core & Main, Inc. (CNM) : Free Stock Analysis Report

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