Despite a reduction in commercial waste volumes amid the COVID-19 pandemic because of widespread closures of offices, restaurants, and other business establishments, higher residential waste volume helped the waste management industry remain resilient. Furthermore, with the speedy progress made by COVID-19 vaccinations and the reopening of factories, malls, and other infrastructures, the industry should witness substantial growth in the coming months. Indeed, the global waste management industry is expected to hit $542.7 billion by 2026, registering a 5.1% CAGR.
The use of advanced technologies for e-waste collection and recycling should drive the growth of waste management companies. And the efforts of governments worldwide in boosting awareness related to waste segregation and in implementing stringent regulations for environmental protection should further propel the industry’s growth.
Given this backdrop, we think it could be wise to bet on quality waste management stocks Waste Management, Inc. (WM), Republic Services, Inc. (RSG), and Clean Harbors, Inc. (CLH).
Waste Management, Inc. (WM)
WM is a Houston, Tex.-based waste management, comprehensive waste, and environmental services company. It operates 346 transfer stations, 293 active landfill disposal sites, 146 recycling plants, 111 beneficial-use landfill gas projects, and six independent power production plants. In addition, the company provides Home Waste Services, Business Waste Services, Temporary Dumpster Rental, and Bagster Bag.
In May, WM held a career day event in which the company announced its first-of-its-kind “Your Tomorrow” program to provide education and training to its employees. This training should help its employees increase their industry knowledge to keep pace with the growing demand.
WM’s operating revenue increased 25.7% year-over-year to $4.48 billion in the second quarter, ended June 30, 2021. The company’s income from operations rose 50.1% from its year-ago value to $791 million. Also, its net income grew 14.3% from the prior-year quarter to $351 million. Its EPS increased 15.3% year-over-year to $0.83.
Analysts expect WM’s revenue for its fiscal year 2021 to be $17.62 billion, representing15.8% growth year-over-year. In addition, the company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. The company’s EPS is expected to grow 23.8% in the current year. The stock has gained 28.6% in price over the past six months and 31.9% over the past nine months.
WM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has a B grade for Momentum, Quality, and Stability. We’ve also graded WM for Growth, Sentiment, and Value. Click here to access all WM’s ratings.
WM is ranked #3 of 18 stocks in the B-rated Waste Disposal industry.
Republic Services, Inc. (RSG)
RSG in Phoenix, Ariz., is a recycling and non-hazardous solid waste disposal company. It serves small-container, larger-container, municipal and residential customers. In addition, the company offers disposal services for liquids and in-plant services, such as transportation and logistics.
Last month, RSG collaborated with Raven SR Inc., a renewable fuel company, to convert organic waste into green hydrogen at a site in California. The company will create additional clean energy resources and emission-free hydrogen fuel for heavy-duty vehicles through this collaboration.
For the second quarter, ended June 30, 2021, RSG’s revenue increased 14.6% year-over-year to $2.81 billion. The company’s operating income rose 31% from its year-ago value to $517.9 million. Its net income grew 46.7% from the prior-year quarter to $332 million. Also, its EPS increased 45.1% year-over-year to $1.03.
RSG’s revenue is expected to increase 8.9% year-over-year to $11.06 billion in its fiscal year 2021. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s EPS is expected to increase 13.8% in the current year. The stock has gained 31% in price over the past six months and 31.5% over the past nine months.
RSG’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. Also, the stock has a B grade for Growth, Momentum, and Quality.
In addition to the POWR Rating grades we’ve just highlighted, one can see RSG’s ratings for Value, Stability, and Sentiment here. Again, the stock is ranked #2 in the Waste Disposal industry.
Clean Harbors, Inc. (CLH)
CLH is a provider of environmental and industrial services. It serves industries that include chemical and manufacturing, most of the Fortune 500 companies, and government agencies. The Norwell, Mass., company’s services include Technical Services, Industrial & Field Services, and Oil & Gas Lodging Services. In addition, it offers waste disposal services, recycling services, chemical packing, daylight and hydro excavation, seismic services, and various other waste management services.
Last month, CLH acquired an industrial cleaning and specialty maintenance provider, HydroChemPSC (HPC), for $1.25 billion in cash. With this acquisition, CLH could receive a $40 million cost-benefit after the first full year of operations, which is equivalent to a purchase multiple of 8.1 times on a post synergized basis.
CLH’s revenue increased 30.5% year-over-year to $0.93 billion for the second quarter, ended June 30, 2021. The company’s income from operations grew 82.7% from its year-ago value to $110 million. Its net income increased 131.1% from the prior-year quarter to $67.08 million. Also, its EPS increased 134.6% year-over-year to $1.22.
For the fiscal year 2021, analysts expect CLH’s revenue to be $3.52 billion, representing 12.1% year-over-year growth. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Its EPS is expected to increase 42.2% in the current year.
CLH’s stock price has surged to 35.3% in price over the past nine months and 76.9% over the past year.
It’s no surprise that CLH has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has a B grade for Value, Momentum, and Sentiment.
Click here to see the additional POWR Ratings for CLH (Growth, Stability, and Quality). CLH is ranked #1 in the Waste Disposal industry.
WM shares were trading at $154.70 per share on Friday afternoon, up $0.90 (+0.59%). Year-to-date, WM has gained 32.83%, versus a 20.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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