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Covanta Holding's Systematic Capital Investments Bode Well

Zacks Equity Research

Covanta Holding’s CVA focus on developing and commercializing new technology, systematic capital expenditure and development of total ash processing system are tailwinds.

We issued an updated research report on this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company has a trailing four-quarter positive earnings surprise of 22.93%, on average.

What’s Driving the Stock?

Over the past several years, Covanta Holding has been investing substantially to purchase property, plant and equipment. These expenditures were directed toward addressing the infrastructural need, while expanding its customer base. The investments will enable the company to focus on various capital projects and acquisitions to curb competition, increase safety and reliability of its Energy-from-Waste (EfW) projects, provide solutions for solid waste and recyclable households besides various hazardous wastes as well as for replacing aging infrastructure.

During first-quarter 2020,majority of waste and service revenues were related to residential waste generation and were stable and unaffected by the pandemic. In Waste and Service, the company generated 5.8% higher revenues on a year-over-year basis in the first quarter.

In 2019, the company invested $56 million in different growth projects. The company aims to invest nearly $17 million in different growth projects in 2020 to expand existing operation. This includes $2-million investments for strengthening international operation.

However, higher Plant operating expenses, stringent laws and regulations in the United States and rising debt levels are headwinds for the company.

Price Performance

Shares of Covanta Holding have lost 45.3% in the past 12 months compared with the industry’s decline of 14.5%.

Stocks to Consider

A few better-ranked stocks from the same sector are Bloom Energy Corporation BE, Devon Energy Corporation DVN and Noble Energy Inc. NBL. Bloom Energy sports a Zacks Rank #1(Strong Buy), while Devon Energy and Noble Energy hold a Zacks Rank #2 (Buy) at present.

The long-term earnings growth rate of Bloom Energy, Devon Energy and Noble Energy is pegged at 25%, 4.10% and 9%, respectively.

Bloom Energy, Devon Energy and Noble Energy have a trailing four-quarter positive earnings surprise of 75.40%, 60.57% and 144.15%, respectively, on average.

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Noble Energy Inc. (NBL) : Free Stock Analysis Report
Devon Energy Corporation (DVN) : Free Stock Analysis Report
Covanta Holding Corporation (CVA) : Free Stock Analysis Report
Bloom Energy Corporation (BE) : Free Stock Analysis Report
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