Last year witnessed a significant rise in waste volumes from the medical and household segments owing to the use of PPE kits and to widespread remote lifestyles, while industrial waste declined sharply to the detriment of waste management companies’ business. The waste management industry is expected to make a sharp turnaround in 2021, however, as industrial production (and waste generation) returns to full swing this year. The global industrial waste management market is expected to grow at a CAGR of 8.1% over the next seven years to $2.15 trillion in 2027.
While the majority of industrial waste is generated by developing countries, the U.S.’ plan to remodel its infrastructure and industrial segments to ensure sustainable operations is expected to increase the country's total waste volume. This, combined with reviving production levels, should bolster the demand for comprehensive waste management services in the coming months.
Based on this, we think waste management companies Waste Management, Inc. (WM), Republic Services, Inc. (RSG), and Clean Harbors, Inc. (CLH) are likely to witness an increase in demand for their services this year and beyond.
Waste Management, Inc. (WM)
Based in Houston, Texas, WM is a provider of environmental waste management services that operates through two segments – Solid Waste and Others. WM provides collection services that include the pickup and transportation of waste and recyclable materials to a transfer station, material recovery facility (MRF), or disposal site.
The company is expected to release the fourth quarter and full-year 2020 financial results before the market opens on February 18. WM’s revenues have increased 8.4% sequentially to $3.86 billion for the third quarter ended September 30, 2020. The company’s revenue from the transfer segment increased 2.3% year-over-year, while revenue from its recycling segment increased 18.4% year-over-year. Its net income has increased 27% sequentially to $390 million. WM reported adjusted EPS of $1.09 for this period, up 23.9% sequentially.
A consensus EPS estimate of $0.99 for the quarter ending March 31, 2021 represents a 6.5% improvement year-over-year. Moreover, WM has surpassed the consensus EPS estimates in each of the trailing four quarters. A consensus revenue estimate of $15.13 billion for the quarter ending March 31, 2021 represents an 8% rise from the same period last year.
WM has been included in Fortune magazine’s list of ‘World’s Most Admired Companies’ for the third year in a row. In December 2020, the company’s Board of Directors approved a 5.5% increase in its quarterly dividend rate for 2021--from $0.545 to $0.575 per share.
The company completed the acquisition of Advanced Disposal on October 30, 2020. The move further solidified WM’s footprint and allows the company to deliver unparalleled access to differentiated, sustainable waste management and recycling services. The stock has gained 15.2% over the past nine months to close Friday’s trading session at $113.25.
WM’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
The stock has a grade of A for both Stability and Quality. We have also graded WM for Growth, Value, Momentum, and Sentiment. Click here to see all of WM’s ratings.
WM is ranked #2 of17 stocks in the Waste Disposal industry.
Republic Services, Inc. (RSG)
Based in Phoenix, Arizona, RSG is an industry leader in U.S. recycling and non-hazardous solid waste disposal. The company provides non-hazardous solid waste collection, transfer, recycling, disposal, and environmental services and serves small-container, large-container, and municipal and residential customers.
The company is scheduled to release its fourth quarter 2020 financial results on February 22, 2021 after the market closes. For the third quarter ended September 30, 2020, RSG’s revenues have increased 4.8% sequentially to $2.57 billion. Its net income increased 15.3% sequentially to $260 million, while its adjusted EPS increased 23.5% sequentially to $1.
A consensus EPS estimate of $0.83 for the quarter ending March 31, 2021 represents a 7.8% improvement year-over-year. Moreover, RSG surpassed the consensus EPS estimates in each of the trailing four quarters. A consensus revenue estimate of $10.72 billion for the fiscal year 2021 represents an 5.6% rise from the same period last year.
RSG has been named in Fortune's 2021 World's Most Admired Companies list, highlighting the company’s ongoing team-focused management, innovation and socially responsible business practices.
The company entered into a strategic alliance agreement with Romeo Power Inc. (RMO) on January 28 to collaborate on the development of RMO’s battery technology for use in RSG’s electric garbage trucks. The stock has gained 13.7% over the past nine months to close Friday’s trading session at $91.26.
RSG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
RSG has a grade of B for Stability, Sentiment and Quality as well. Apart from these, click here to access RSG’s grade for Growth, Momentum and Value.
RSG is ranked #3 in the same industry.
Clean Harbours, Inc. (CLH)
Founded in 1980, CLH provides a broad range of services such as end-to-end hazardous waste management, emergency spill response, industrial cleaning and maintenance, and recycling services. The company operates primarily through six segments — Technical Services, Industrial Services, Field Services, Safety-Kleen, Oil and Gas Field Services, and Lodging Services.
CLH is scheduled to release its fourth-quarter and full-year 2020 financial results on February 24, 2021. Its revenues have increased 9.8% sequentially to $779.34 million for the third quarter ended September 30, 2020. Its net income has increased nearly 51% year-over-year to $54.91 million. And its adjusted EPS increased 25% year-over-year to $0.90.
A consensus EPS estimate of $0.30 for the quarter ending March 31, 2021 represents a 7.1% improvement year-over-year. Moreover, CLH has surpassed the consensus EPS estimates in three out of trailing four quarters. The consensus revenue estimate of $3.33 billion for the fiscal year 2021 represents an 5.7% rise from the same period last year.
In May 2020, NASCAR expanded its partnership with the company for its prevention of infectious disease and decontamination needs. Over the past three months, the stock has rallied to close Friday’s trading session at $85.42. On a year-to-date basis, the stock has gained 12.3%.
CLH’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary ratings system.
The stock has a grade of A for Sentiment and B for Value, Stability and Quality. The stock is also graded for Growth and Momentum. Click here to access all of CLH’s ratings.
The stock is currently ranked #1 in the same industry.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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WM shares were trading at $113.32 per share on Tuesday afternoon, up $0.07 (+0.06%). Year-to-date, WM has declined -3.91%, versus a 5.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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