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Waste Management Demand Continues to Rise: 4 Stocks in Focus

Shuvra Shankar Dey

The Waste Management industry has outpaced the S&P 500 Index so far this year. The industry, which is placed in the top 30% of more than the 250 Zacks industries, has rallied 20.8% in the said time frame, comfortably surpassing the index’s rise of 12.2%.

Primary Catalysts

Increase in population, industrialization and urbanization has resulted in a significant rise in garbage and recycling. However, the number of places to store or dump garbage has declined with landfills being filled and closed. Increased technology adoption and advanced collection and recycling solutions have increased garbage removal prices, thus creating opportunities for waste management companies.

Government initiatives to introduce sustainable waste management mechanisms and put a check on illegal dumping arealso expected to drive demand. The Environmental Protection Agency’s (EPA) Resource Conservation and Recovery Act (RCRA), aimed at reducing open dumping and managing hazardous and non-hazardous waste, will significantly benefit the industry.

Per a recent report from Allied Market Research, the global waste management market is projected to witness CAGR of 6% from 2018 to 2025 to reach $530 billion.

Garbage production will continue, irrespective of economic condition, keeping demand for waste management services fairly stable through the economic cycle. The companies generate stable revenues and cash flows and pay out stable dividends. They generate revenues from customers across diverse industries. This makes waste management stocks a good defensive play.

Main Roadblocks

The state of recycling business is currently poor, mainly due to China's National Sword Program. Owing to the program, import of the majority of recycled products has been either banned or severely restricted in the country. Recycling operations across the industry and the world have been severely hampered.

The industry is fuel dependent and rising fuel costs weigh on profits. Slow growth in the U.S. housing market and an economic recession are lingering risks.These will lead to reduction in waste volumes affecting both the top and the bottom lines of the industry players.

Given this backdrop, here are some stocks that are in focus.

Norwell, MA-based Clean Harbors CLH provides environmental, energy and industrial services.

The company is North America’s largest re-refiner and recycler of used oil and a leading parts washers and environmental services provider to commercial, industrial and automotive customers.

Currently, it sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for current-year EPS has increased 6.6% in the past 60 days.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Clean Harbors, Inc. Price, Consensus and EPS Surprise

Clean Harbors, Inc. Price, Consensus and EPS Surprise

Clean Harbors, Inc. price-consensus-eps-surprise-chart | Clean Harbors, Inc. Quote

Boise, ID-based US Ecology ECOL provides environmental services to commercial and government entities in the United States, Canada, and Mexico.

The company is benefiting from organic growth in transportation and logistics services and in Industrial Services. The 2018 acquisition of US Ecology Dallas and Midland operations has started contributing to its top line.

It also sports a Zacks Rank #1. The Zacks Consensus Estimate for current-year EPS has increased1.3% in the past 60 days.

US Ecology, Inc. Price, Consensus and EPS Surprise

US Ecology, Inc. Price, Consensus and EPS Surprise

US Ecology, Inc. price-consensus-eps-surprise-chart | US Ecology, Inc. Quote

Houston, TX-based environmental services provider Waste Management’s WM collection, landfill and transfer businesses are in great shape. Management expects collection and disposal businesses to drive strong earnings growth and more than offset the decline in recycling business.

The company carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for current-year EPS has increased 0.9% in the past 60 days.

Waste Management, Inc. Price, Consensus and EPS Surprise

Waste Management, Inc. Price, Consensus and EPS Surprise

Waste Management, Inc. price-consensus-eps-surprise-chart | Waste Management, Inc. Quote

Phoenix, AZ-based Republic Services’ RSG is benefiting from strong pricing across the collection, disposal and recycling processing businesses, and acquisitions.

The company carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for current-year EPS has increased 0.6% in the past 60 days.

Republic Services, Inc. Price, Consensus and EPS Surprise

Republic Services, Inc. Price, Consensus and EPS Surprise

Republic Services, Inc. price-consensus-eps-surprise-chart | Republic Services, Inc. Quote

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