In spite of a debt-laden balance sheet, shares of Waste Management, Inc. WM have gained 14.8% in the past six months, significantly outperforming the 6.3% rise of the industry it belongs to.
Catalysts Behind the Upside
Waste Management continues to execute its core operating objectives of focused differentiation and continuous improvement, and instill price and cost discipline to achieve better margins. Focused differentiation through capitalization of extensive assets ensures profitable growth and offers competitive advantages.
Strong performance of the solid waste business continues to boost cash and earnings. Waste Management expects yield momentum to continue in its solid waste lines of business.
The company's successful cost-reduction initiatives have helped it in accomplishing remarkable gross margin expansion and EBITDA growth over the quarters. Acquisitions of Anderson Rubbish Disposal and Moorpark Rubbish Disposal are helping it to streamline existing operations.
Waste Management is focused on maximizing return on disposal network. A strong economy and benefits of volumes from third-party haulers that select the company’s close end disposal sites lead to higher volume being disposed at its facilities. The company is expected to leverage logistical benefits of its disposal network and increase returns on large investment in the network.
The company’s dominant market capitalization, steady dividend payouts and share repurchase policy reflect its commitment to create value for shareholders and underline its confidence in its business. In the first nine months of 2018, Waste Management repurchased shares worth $750 million and paid $605 million in dividends.
The company paid aggregate cash dividends of $750 million, $726 million and $695 million during 2017, 2016 and 2015, respectively. It paid $750 million, $725 million and $600 million for share repurchases in 2017, 2016 and 2015, respectively.
Zacks Rank & Stocks to Consider
Waste Management currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A few better-ranked stocks in the broader Zacks Business Services sector include Booz Allen Hamilton BAH, Waste Connections WCN and Republic Services RSG, each carrying a Zacks Rank #2 (Buy). Long-term expected EPS (three to five years) growth rate for Booz Allen Hamilton, Waste Connections and Republic Services is 14.4%, 11.7% and 10.7%, respectively.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
See Latest Stocks Today >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Waste Connections, Inc. (WCN) : Free Stock Analysis Report
Waste Management, Inc. (WM) : Free Stock Analysis Report
Republic Services, Inc. (RSG) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research