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Rising awareness regarding pollution-related health problems, as a result of rapid industrialization, will continue to boost the demand for air quality control systems and other emission-abatement products. This bodes well for the Zacks Pollution Control industry. To address climate change issues, governments across the globe are implementing stringent emission standards. This should foster growth of the industry, despite ongoing headwinds from supply chain constraints and raw material cost inflation.
Given the buoyancy in the industry, Casella Waste Systems, Energy Recovery, Heritage-Crystal Clean and CECO Environmental Corp. are poised for growth.
About the Industry
The Zacks Pollution Control industry comprises companies that are engaged in providing innovative filtration systems, replacement parts, solutions for managing medical wastes, energy recovery devices and other products. These products are primarily used in commercial, automotive repair, industrial, home healthcare, retail, construction, pharmaceutical and hospitality end markets.
A few industry participants offer solutions to deal with industrial waste and commercial chemical products as well as technologies to tackle air pollution. One of the companies also delivers services related to infrastructure, water, resource management, energy, etc., to government and commercial clients. These companies are enhancing investments in developing innovative technologies and improving customer and employee experience as well as supply-chain modernization programs.
3 Trends Shaping the Future of the Pollution Control Industry
Growing Demand for Air Quality Control: Pollution control companies stand to benefit from increased demand for air quality control systems owing to growing industrialization in developing countries. With power plants being a major source of harmful gas emissions, there is strong demand for air filters in the power generation industry. Increased awareness regarding pollution-related health risks, growing concerns regarding environmental pollution and the need for government actions to curtail industrial emissions should foster growth of the industry players.
Stringent Government Regulations: With rapid urbanization, several countries are implementing laws and regulations for emission standards. This should drive demand for pollution control equipment. The U.S. government's heightened focus on climate change is expected to create business opportunities for industry players. The European Union’s pollution prevention and control initiatives, based on Best Available Techniques (BAT), should continue to strengthen the demand for pollution abatement technologies in European countries.
Emergence of Alternative Sources of Energy: With the United States and other developed countries reducing their dependencies on fossil fuels and switching to renewable sources of energy for power generation, demand for industrial emission-abatement products and technologies is witnessing a setback. Automakers rapidly transitioning to electric vehicles as part of their sustainability initiatives is expected to dampen demand in the industry.
Supply chain constraints, and high costs of raw materials, labor and freight are additional challenges facing the industry. Pricing actions are helping these companies cope with inflationary pressure.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Pollution Control industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #19. This rank places it in the top 8% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are keeping more faith with this group's earnings growth potential. The industry’s earnings estimates for 2022 have increased 7.1% over the past year.
Given the bullish near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it is worth taking a look at the industry’s shareholder returns and its current valuation first.
Industry Outperforms Both Sector & S&P 500
The Zacks Pollution Control industry has outperformed both the broader Industrial Products sector and the Zacks S&P 500 composite index over the past year.
Over this period, the industry has declined 8.7%, compared with the broader sector and the S&P 500 Index’s 18.3% and 9.4% decrease, respectively.
Industry's Current Valuation
On the basis of forward P/E (F12M), which is a commonly used multiple for valuing pollution control stocks, the industry is currently trading at 20.91X compared with the S&P 500’s 17.86. It is also above the sector’s P/E (F12) ratio of 15.56X.
Over the past five years, the industry has traded as high as 31.11X, as low as 16.19X and at the median of 21.25X.
Casella: Headquartered in Rutland, VT, Casella provides resource management expertise and services, with a focus on solid waste collection and disposal. Cost-control measures, operational efficiency and pricing actions in response to cost inflation are driving the company’s top line. The series of acquisitions carried out by the company are expected to foster its growth. CWST, sporting a Zacks Rank #1, acquired 11 businesses in the first half of 2022.
The Zacks Consensus Estimate for Casella’s 2022 earnings has been revised upward by 3 cents in the past 60 days. Shares of the company have gained 16.2% over the past year.
Heritage-Crystal Clean: Based in Elgin, IL, Heritage-Crystal Clean provides hazardous and non-hazardous waste services to small and mid-sized manufacturers and other industrial businesses. Higher volumes and pricing are key catalysts to the company’s growth. The strong performance of the Oil Business segment due to an increase in base oil prices bodes well for the company. HCCI’s recent acquisition of Patriot expands the company’s operations in environmental and waste disposal services. The company flaunts a Zacks Rank #1.
The Zacks Consensus Estimate for Heritage-Crystal Clean’s 2022 earnings has been revised upward by 42.9% in the past 60 days. Shares of the company have appreciated nearly 16% in the past year.
CECO Environmental: Headquartered in Dallas, TX, CECO Environmental is an environmentally-focused industrial company, which serves diverse markets of industrial air, industrial water and energy transition. Strong orders and backlog levels are supporting the company’s growth. The company’s strategic acquisitions to expand its capabilities in the industrial air and industrial water platforms should bolster its growth. CECE carries a Zacks Rank #2.
The Zacks Consensus Estimate for CECO Environmental’s 2022 earnings has been revised upward by 16.7% in the past 60 days. Shares of the company have rallied 42.2% in the past year.
Energy Recovery: Headquartered in San Leandro, CA, Energy Recovery is a leading global developer and manufacturer of highly-efficient energy recovery devices utilized in the water desalination industry. The company, carrying a Zacks Rank #2, is poised to benefit from strength in its desalination and industrial wastewater business, product introductions and a strong pipeline of projects in the quarters ahead.
The Zacks Consensus Estimate for Energy Recovery’s 2022 earnings has been revised upward by 11.4% in the past 60 days. Shares of the company have gained around 23% in a year.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights Casella Waste Systems, Energy Recovery, Heritage-Crystal Clean and CECO Environmental
For Immediate Release
Chicago, IL – August 26, 2022 – Today, Zacks Equity Research discusses Casella Waste Systems (CWST - Free Report) , Energy Recovery (ERII - Free Report) , Heritage-Crystal Clean and CECO Environmental Corp. .
Industry: Pollution Control
Link: https://www.zacks.com/commentary/1972361/4-top-stocks-from-the-thriving-pollution-control-industry
Rising awareness regarding pollution-related health problems, as a result of rapid industrialization, will continue to boost the demand for air quality control systems and other emission-abatement products. This bodes well for the Zacks Pollution Control industry. To address climate change issues, governments across the globe are implementing stringent emission standards. This should foster growth of the industry, despite ongoing headwinds from supply chain constraints and raw material cost inflation.
Given the buoyancy in the industry, Casella Waste Systems, Energy Recovery, Heritage-Crystal Clean and CECO Environmental Corp. are poised for growth.
About the Industry
The Zacks Pollution Control industry comprises companies that are engaged in providing innovative filtration systems, replacement parts, solutions for managing medical wastes, energy recovery devices and other products. These products are primarily used in commercial, automotive repair, industrial, home healthcare, retail, construction, pharmaceutical and hospitality end markets.
A few industry participants offer solutions to deal with industrial waste and commercial chemical products as well as technologies to tackle air pollution. One of the companies also delivers services related to infrastructure, water, resource management, energy, etc., to government and commercial clients. These companies are enhancing investments in developing innovative technologies and improving customer and employee experience as well as supply-chain modernization programs.
3 Trends Shaping the Future of the Pollution Control Industry
Growing Demand for Air Quality Control: Pollution control companies stand to benefit from increased demand for air quality control systems owing to growing industrialization in developing countries. With power plants being a major source of harmful gas emissions, there is strong demand for air filters in the power generation industry. Increased awareness regarding pollution-related health risks, growing concerns regarding environmental pollution and the need for government actions to curtail industrial emissions should foster growth of the industry players.
Stringent Government Regulations: With rapid urbanization, several countries are implementing laws and regulations for emission standards. This should drive demand for pollution control equipment. The U.S. government's heightened focus on climate change is expected to create business opportunities for industry players. The European Union’s pollution prevention and control initiatives, based on Best Available Techniques (BAT), should continue to strengthen the demand for pollution abatement technologies in European countries.
Emergence of Alternative Sources of Energy: With the United States and other developed countries reducing their dependencies on fossil fuels and switching to renewable sources of energy for power generation, demand for industrial emission-abatement products and technologies is witnessing a setback. Automakers rapidly transitioning to electric vehicles as part of their sustainability initiatives is expected to dampen demand in the industry.
Supply chain constraints, and high costs of raw materials, labor and freight are additional challenges facing the industry. Pricing actions are helping these companies cope with inflationary pressure.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Pollution Control industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #19. This rank places it in the top 8% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are keeping more faith with this group's earnings growth potential. The industry’s earnings estimates for 2022 have increased 7.1% over the past year.
Given the bullish near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it is worth taking a look at the industry’s shareholder returns and its current valuation first.
Industry Outperforms Both Sector & S&P 500
The Zacks Pollution Control industry has outperformed both the broader Industrial Products sector and the Zacks S&P 500 composite index over the past year.
Over this period, the industry has declined 8.7%, compared with the broader sector and the S&P 500 Index’s 18.3% and 9.4% decrease, respectively.
Industry's Current Valuation
On the basis of forward P/E (F12M), which is a commonly used multiple for valuing pollution control stocks, the industry is currently trading at 20.91X compared with the S&P 500’s 17.86. It is also above the sector’s P/E (F12) ratio of 15.56X.
Over the past five years, the industry has traded as high as 31.11X, as low as 16.19X and at the median of 21.25X.
4 Pollution Control Stocks to Buy
Below we discuss four stocks from the industry that have solid growth opportunities. The stocks carry a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Casella: Headquartered in Rutland, VT, Casella provides resource management expertise and services, with a focus on solid waste collection and disposal. Cost-control measures, operational efficiency and pricing actions in response to cost inflation are driving the company’s top line. The series of acquisitions carried out by the company are expected to foster its growth. CWST, sporting a Zacks Rank #1, acquired 11 businesses in the first half of 2022.
The Zacks Consensus Estimate for Casella’s 2022 earnings has been revised upward by 3 cents in the past 60 days. Shares of the company have gained 16.2% over the past year.
Heritage-Crystal Clean: Based in Elgin, IL, Heritage-Crystal Clean provides hazardous and non-hazardous waste services to small and mid-sized manufacturers and other industrial businesses. Higher volumes and pricing are key catalysts to the company’s growth. The strong performance of the Oil Business segment due to an increase in base oil prices bodes well for the company. HCCI’s recent acquisition of Patriot expands the company’s operations in environmental and waste disposal services. The company flaunts a Zacks Rank #1.
The Zacks Consensus Estimate for Heritage-Crystal Clean’s 2022 earnings has been revised upward by 42.9% in the past 60 days. Shares of the company have appreciated nearly 16% in the past year.
CECO Environmental: Headquartered in Dallas, TX, CECO Environmental is an environmentally-focused industrial company, which serves diverse markets of industrial air, industrial water and energy transition. Strong orders and backlog levels are supporting the company’s growth. The company’s strategic acquisitions to expand its capabilities in the industrial air and industrial water platforms should bolster its growth. CECE carries a Zacks Rank #2.
The Zacks Consensus Estimate for CECO Environmental’s 2022 earnings has been revised upward by 16.7% in the past 60 days. Shares of the company have rallied 42.2% in the past year.
Energy Recovery: Headquartered in San Leandro, CA, Energy Recovery is a leading global developer and manufacturer of highly-efficient energy recovery devices utilized in the water desalination industry. The company, carrying a Zacks Rank #2, is poised to benefit from strength in its desalination and industrial wastewater business, product introductions and a strong pipeline of projects in the quarters ahead.
The Zacks Consensus Estimate for Energy Recovery’s 2022 earnings has been revised upward by 11.4% in the past 60 days. Shares of the company have gained around 23% in a year.
Why Haven’t You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.