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3 Waste Removal Services Stocks to Watch Amid Industry Challenges
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The Waste Management industry is witnessing positive trends in government regulations, the adoption of advanced technologies and a heightened awareness of environmental issues. Despite rising operating costs, the industry does not shy away from rapid industrialization and urbanization. Per Statista, the global waste management sector reached $1.3 trillion in 2022 and is expected to undergo substantial growth, reaching $2 trillion by 2030. The potential expansion of the global waste management sector can be attributed to better waste collection methods and rising volumes of waste in emerging markets.
Three promising stocks from theWaste Removal Services market are Republic Services, Inc. (RSG - Free Report) , Clean Harbors, Inc. (CLH - Free Report) and Aris Water Solutions, Inc. (ARIS - Free Report) .
About the Industry
Companies in the ZacksWaste Removal Servicesindustry play a vital role in the collection, treatment and responsible management of diverse waste types, aiming to minimize their impact on the environment as well as public health. This market is categorized into distinct segments based on the kind of waste, including industrial, commercial, domestic and agricultural waste. The Industrial waste segment has gained significance due to the ongoing industrial expansion, creating a substantial demand for efficient waste management solutions. The market encompasses Collection and Disposal services. The Disposal services segment, primarily fueled by the growing need for waste recycling to mitigate environmental impacts, stands as the primary revenue-generating category.
What's Shaping the Future of the Business Services Industry?
Growing Necessity of Environmental, Social and Governance (“ESG”) Goals: Waste management is a cornerstone of ESG principles, as it assists companies in improving their ESG ratings by promoting environmental sustainability, fostering social well-being and upholding good governance. Per a Grand View Research, the average ESG disclosure score for the waste management industry lies in the range of 50-60%. Embracing responsible waste management meets legal requirements and aligns with consumer and investor desires for sustainable and ethical business practices. At present, waste management is not only a duty but also a chance for businesses to showcase their dedication to ESG values, which underpin lasting success and resilience.
Technology Drives Waste Management Industry Growth: Technology has become an important component in waste management, addressing the challenges of waste generation and environmental impacts. This transformative correlation promises a more sustainable future. For instance, artificial intelligence is emerging as a powerful tool to sort waste and keep recyclable materials from going into the landfills. Advancing technology results in more efficient, eco-friendly waste management, lowering the ecological footprint and promoting sustainability. Waste challenges can be mitigated using technology that leads us toward responsible waste management and a cleaner planet.
Innovations in Waste-to-Energy (“WTE”)Technology: WTE comprises thermal (pyrolysis, incineration, and gasification) and biological solutions (composting and anaerobic digestion), which play a crucial role in sustainable waste management. This technology transforms waste into energy via methods like incineration or gasification. Per a report by Mordor Intelligence, the Waste-to-Energy Market size is estimated to be $38.4 billion in 2024 and reach $65.3 billion by 2029, at a CAGR of 11.2%. The growth is anticipated to be driven by the increase in the amount of waste generation, growing waste management concerns to meet sustainable living standards and increased focus on non-fossil fuel. The industry holds an important position in the era of clean energy, offering a renewable energy source and addressing the mounting challenges around waste management.
Rising Operating Costs are a Concern: Waste management is a time-consuming and complex process. It requires higher capital and operating costs to manage waste collection vehicles, bins and processing equipment, along with a huge number of workers. Such high operational expenses are expected to keep the bottom line of the companies in this industrial cohort under pressure.
Zacks Industry Rank Indicates Dull Near-Term Prospects
The Zacks Waste Removal Services industry, which is housed within the Zacks Business Services sector, currently carries a Zacks Industry Rank #190. This rank places it in the bottom 24% of 251 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates a continued outperformance in the near term. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Before we present a few stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock market performance and current valuation.
Industry Outperforms Sector but Lags S&P 500
The Zacks Waste Removal Services industry has outperformed the broader sector but lagged the S&P 500 over the past year.
The industry has gained 32.3% compared with 29.4% growth of the broader sector. The Zacks S&P 500 composite has risen 34.7% in the said time frame.
One-Year Price Performance
Industry's Current Valuation
Based on EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization), which is commonly used for valuing Waste Removal services stocks because of their high debt levels, the industry is currently trading at 12.25X compared with the S&P 500’s 19.21X and the sector’s 28.81X.
Over the past five years, the industry has traded as high as 13X and as low as 8.15X, the median being 11.35X, as the charts below show.
EV-to-EBITDA
3 Waste Removal Services Stocks to Keep a Close Eye on
Below, we have presented three stocks that are anticipated to grow in the near term.
Republic Services, Inc.: This environmental service provider’s top line is benefiting from customer loyalty, digital capabilities and sustainability. RSG’s commitment to delivering top-notch essential service and sustainability offerings has driven customer loyalty. In the second quarter of 2024, customer retention rate remained at more than 94% and Net Promoter Scores continued to improve. The company has expanded its digital capabilities by implementing digital tools that enhance customer and employee experience. Also, in the second quarter of 2024, RSG witnessed growth in organic revenues led by strong pricing across the business.
The Zacks Consensus Estimate for 2024 bottom line has increased 2.1% in the past 90 days. RSG’s shares have risen 5.5% in the past six months.
Price and Consensus: RSG
Clean Harbors, Inc.: This environmental and industrial services provider’s revenues are driven by record volumes of containerized waste and sustained pricing momentum. The Environmental Services segment’s performance improved on the back of robust demand for the company’s facilities network and several service businesses, Field Services in particular. Safety-Kleen segment’s growth was fueled by improved lubricant pricing.
CLH has a Zacks Rank #3 (Hold) at present. The Zacks Consensus Estimate for 2024 EPS has improved 2.4% in the past 90 days. CLH’s shares have risen 20.8% in the past six months.
Price and Consensus: CLH
Aris Water Solutions, Inc.: This water handling and recycling solutions provider witnessed significant improvement in its performance in the second quarter of 2024. Resilient volumes from ARIS’s long-term contracted customers and continued operational execution turned out to be beneficial for the company’s growth. Consistent revenue growth, structurally better margins and efficient capital investment allowed the company to generate excess cash and improve its ability to increase returns to shareholders.
ARIS carries a Zacks Rank #3 at present. The Zacks Consensus Estimate for its 2024 bottom line has increased 2.3% in the past 90 days. ARIS’ shares have risen 16.1% in the past six months.
Price and Consensus: ARIS
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3 Waste Removal Services Stocks to Watch Amid Industry Challenges
The Waste Management industry is witnessing positive trends in government regulations, the adoption of advanced technologies and a heightened awareness of environmental issues. Despite rising operating costs, the industry does not shy away from rapid industrialization and urbanization. Per Statista, the global waste management sector reached $1.3 trillion in 2022 and is expected to undergo substantial growth, reaching $2 trillion by 2030. The potential expansion of the global waste management sector can be attributed to better waste collection methods and rising volumes of waste in emerging markets.
Three promising stocks from theWaste Removal Services market are Republic Services, Inc. (RSG - Free Report) , Clean Harbors, Inc. (CLH - Free Report) and Aris Water Solutions, Inc. (ARIS - Free Report) .
About the Industry
Companies in the ZacksWaste Removal Servicesindustry play a vital role in the collection, treatment and responsible management of diverse waste types, aiming to minimize their impact on the environment as well as public health. This market is categorized into distinct segments based on the kind of waste, including industrial, commercial, domestic and agricultural waste. The Industrial waste segment has gained significance due to the ongoing industrial expansion, creating a substantial demand for efficient waste management solutions. The market encompasses Collection and Disposal services. The Disposal services segment, primarily fueled by the growing need for waste recycling to mitigate environmental impacts, stands as the primary revenue-generating category.
What's Shaping the Future of the Business Services Industry?
Growing Necessity of Environmental, Social and Governance (“ESG”) Goals: Waste management is a cornerstone of ESG principles, as it assists companies in improving their ESG ratings by promoting environmental sustainability, fostering social well-being and upholding good governance. Per a Grand View Research, the average ESG disclosure score for the waste management industry lies in the range of 50-60%. Embracing responsible waste management meets legal requirements and aligns with consumer and investor desires for sustainable and ethical business practices. At present, waste management is not only a duty but also a chance for businesses to showcase their dedication to ESG values, which underpin lasting success and resilience.
Technology Drives Waste Management Industry Growth: Technology has become an important component in waste management, addressing the challenges of waste generation and environmental impacts. This transformative correlation promises a more sustainable future. For instance, artificial intelligence is emerging as a powerful tool to sort waste and keep recyclable materials from going into the landfills. Advancing technology results in more efficient, eco-friendly waste management, lowering the ecological footprint and promoting sustainability. Waste challenges can be mitigated using technology that leads us toward responsible waste management and a cleaner planet.
Innovations in Waste-to-Energy (“WTE”)Technology: WTE comprises thermal (pyrolysis, incineration, and gasification) and biological solutions (composting and anaerobic digestion), which play a crucial role in sustainable waste management. This technology transforms waste into energy via methods like incineration or gasification. Per a report by Mordor Intelligence, the Waste-to-Energy Market size is estimated to be $38.4 billion in 2024 and reach $65.3 billion by 2029, at a CAGR of 11.2%. The growth is anticipated to be driven by the increase in the amount of waste generation, growing waste management concerns to meet sustainable living standards and increased focus on non-fossil fuel. The industry holds an important position in the era of clean energy, offering a renewable energy source and addressing the mounting challenges around waste management.
Rising Operating Costs are a Concern: Waste management is a time-consuming and complex process. It requires higher capital and operating costs to manage waste collection vehicles, bins and processing equipment, along with a huge number of workers. Such high operational expenses are expected to keep the bottom line of the companies in this industrial cohort under pressure.
Zacks Industry Rank Indicates Dull Near-Term Prospects
The Zacks Waste Removal Services industry, which is housed within the Zacks Business Services sector, currently carries a Zacks Industry Rank #190. This rank places it in the bottom 24% of 251 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates a continued outperformance in the near term. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Before we present a few stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock market performance and current valuation.
Industry Outperforms Sector but Lags S&P 500
The Zacks Waste Removal Services industry has outperformed the broader sector but lagged the S&P 500 over the past year.
The industry has gained 32.3% compared with 29.4% growth of the broader sector. The Zacks S&P 500 composite has risen 34.7% in the said time frame.
One-Year Price Performance
Industry's Current Valuation
Based on EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization), which is commonly used for valuing Waste Removal services stocks because of their high debt levels, the industry is currently trading at 12.25X compared with the S&P 500’s 19.21X and the sector’s 28.81X.
Over the past five years, the industry has traded as high as 13X and as low as 8.15X, the median being 11.35X, as the charts below show.
EV-to-EBITDA
3 Waste Removal Services Stocks to Keep a Close Eye on
Below, we have presented three stocks that are anticipated to grow in the near term.
Republic Services, Inc.: This environmental service provider’s top line is benefiting from customer loyalty, digital capabilities and sustainability. RSG’s commitment to delivering top-notch essential service and sustainability offerings has driven customer loyalty. In the second quarter of 2024, customer retention rate remained at more than 94% and Net Promoter Scores continued to improve. The company has expanded its digital capabilities by implementing digital tools that enhance customer and employee experience. Also, in the second quarter of 2024, RSG witnessed growth in organic revenues led by strong pricing across the business.
RSG carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for 2024 bottom line has increased 2.1% in the past 90 days. RSG’s shares have risen 5.5% in the past six months.
Price and Consensus: RSG
Clean Harbors, Inc.: This environmental and industrial services provider’s revenues are driven by record volumes of containerized waste and sustained pricing momentum. The Environmental Services segment’s performance improved on the back of robust demand for the company’s facilities network and several service businesses, Field Services in particular. Safety-Kleen segment’s growth was fueled by improved lubricant pricing.
CLH has a Zacks Rank #3 (Hold) at present. The Zacks Consensus Estimate for 2024 EPS has improved 2.4% in the past 90 days. CLH’s shares have risen 20.8% in the past six months.
Price and Consensus: CLH
Aris Water Solutions, Inc.: This water handling and recycling solutions provider witnessed significant improvement in its performance in the second quarter of 2024. Resilient volumes from ARIS’s long-term contracted customers and continued operational execution turned out to be beneficial for the company’s growth. Consistent revenue growth, structurally better margins and efficient capital investment allowed the company to generate excess cash and improve its ability to increase returns to shareholders.
ARIS carries a Zacks Rank #3 at present. The Zacks Consensus Estimate for its 2024 bottom line has increased 2.3% in the past 90 days. ARIS’ shares have risen 16.1% in the past six months.
Price and Consensus: ARIS