The ever-growing global population has resulted in an increase in waste generation. In 2016, global municipal solid waste generation stood at 2.02 billion metric tons and was projected to surpass three billion metric tons by 2050. These concerns have emerged as key drivers for the growth of the environmental services market.
Therefore, it could be wise to invest in fundamentally strong waste disposal stocks Ecolab Inc. (ECL), Republic Services, Inc. (RSG), and Waste Management, Inc. (WM) for a profitable and sustainable portfolio.
The alarmingly rising concerns of environment conservation, waste management, and sustainable practices have brought waste disposal to the center. Factors including sustainability pressure, geographic expansion and consolidation, and the addition of new service capabilities are increasingly driving merger and acquisition activities promoting the waste and recycling sector.
Companies are increasingly investing in technologies and processes to reduce their environmental footprint. Also, increasing regulatory pressures and customer demand for sustainable service are transforming the segment.
With this, the global waste management market is expected to grow from $1.20 trillion in 2024 to reach around $2.17 trillion by 2033, exhibiting growth at a CAGR of 6.8% during the forecast period (2024-2033). During the forecast period, the market is expected to evolve with advances in decomposition technologies and harsher regulatory requirements.
Given the industry’s encouraging prospects, let’s look at the fundamentals of the best three Waste Disposal stocks, beginning with the third choice.
Stock #3: Ecolab Inc. (ECL)
ECL offers water, hygiene, and infection prevention solutions and services internationally. The company operates through: Global Industrial; Global Institutional & Specialty; and Global Healthcare & Life Sciences segments.
On August 1, ECL closed the sale of its global surgical solutions business to Medline for a total consideration of $950 million in cash. Also, owing to ECL’s strong balance sheet, the company intends to use the proceeds from this transaction to repurchase up to an additional $500 million of its stock in the second half of 2024.
On June 3, ECL’s Purolite resin business, and Repligen Corporation (RGEN), a life sciences company focused on bioprocessing technology leadership, commercially launched Purolite’s DurA Cycle, a protein A chromatography resin for large-scale purification processes.
The innovation marked a significant milestone in Purolite’s long-term strategic partnership with Repligen and reflected ECL's dedication to driving advancements in the bioprocessing industry.
ECL’s net sales increased 3.4% year-over-year to $3.98 billion for the second quarter that ended June 30, 2024. The company’s non-GAAP adjusted operating income grew 30.4% from the year-ago value to $669.80 million. Adjusted net income and EPS attributable to Ecolab amounted to $481.50 million and $1.68, indicating growth of 35.3% and 35.5% from the prior year’s quarter, respectively.
In addition, the company’s free cash flow rose 3.2% year-over-year to $414.20 million.
As per the business outlook for the third quarter of 2024, ECL expects its adjusted EPS to be between $1.75 and $1.85, showing a 14% to 20% growth from the year-ago value.
Further, the company raised its full-year 2024 adjusted EPS range to $6.50 - $6.70, reflecting growth between 25% and 29% from the prior guidance of $6.40 - $6.70.
Street expects ECL’s revenue and EPS for the third quarter (ending September 2024) to increase 2.5% and 18.3% year-over-year to $4.06 billion and $1.82, respectively. Furthermore, the company topped the consensus EPS estimates in each trailing four quarters.
Shares of ECL have surged 11.3% over the past six months and 35.5% over the past year to close the last trading session at $249.19.
ECL’s solid prospects are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Stability and Quality. Within the B-rated Waste Disposal industry, ECL is ranked #7 out of 13 stocks.
Click here to access additional ratings of ECL for Growth, Momentum, Sentiment, and Value.
Stock #2: Republic Services, Inc. (RSG)
RSG offers environmental services. The company is involved in the collection and processing of recyclable, solid waste, and industrial waste materials, transportation and disposal of non-hazardous and hazardous waste streams, and other environmental solutions.
On July 24, RSG's Board of Directors approved a $0.04 increase in the company's quarterly dividend. The quarterly dividend of $0.58 per share is to be paid on October 15, 2024, to shareholders of record on October 2, 2024.
RSG’s annual dividend of $2.32 translates to a yield of 1.13% at the current share price. Its four-year average dividend yield is 1.40%. Moreover, the company’s dividend payouts have increased at a CAGR of 8% over the past three years. RSG has raised dividends for 20 consecutive years.
On June 13, RSG and Archaea Energy, a subsidiary of BP (BP), unveiled the first renewable natural gas plant under the companies' Lightning Renewables joint venture. The Archaea Modular Design (AMD) plant at RSG's National Serv-All Landfill in Fort Wayne, Ind., is the first of around 40 landfill gas-to-RNG projects targeted by the JV.
For the second quarter that ended June 30, 2024, RSG’s revenue rose 8.7% from the prior-year quarter to $4.05 billion. Its operating income grew 15.1% from the year-ago value to $813.80 million. The company’s adjusted net income and EPS came in at $508.90 million and $1.61, up 13.9% and 14.2% year-over-year, respectively.
In addition, the company’s adjusted EBITDA increased 12.6% year-over-year to $1.26 billion.
The company updated its full-year 2024 financial guidance. RSG expects revenue in the range of $16.07 billion to $16.12 billion. Its adjusted EBITDA is expected to be $4.90 billion - $4.92 billion. Further, the company's adjusted EPS is set at $6.15 -$6.20, and adjusted free cash flow is projected to be between $2.150 billion and $2.170 billion.
Analysts expect RSG’s revenue and EPS for the third quarter (ending September 2024) to increase 8% and 5% year-over-year to $4.12 billion and $1.62, respectively. Also, the company has surpassed the consensus EPS estimates in all of the trailing four quarters.
RSG’s shares have gained 11.4% over the past six months and 39.3% over the past year to close the last trading session at $205.30.
RSG’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Stability and Quality. Within the B-rated Waste Disposal industry, RSG is ranked #5 among 13 stocks.
In addition to the POWR Ratings we’ve stated above, we also have RSG ratings for Momentum, Growth, Value, and Sentiment. Get all RSG ratings here.
Stock #1: Waste Management, Inc. (WM)
WM provides environmental solutions to residential, commercial, industrial, and municipal customers internationally. The company provides collection services, a material recovery facility (MRF), or a disposal site, and owns and operates transfer stations. It also develops and operates landfill facilities to produce landfill gas to generate electricity.
On August 26, WM declared a quarterly cash dividend of $0.75 per share, payable September 27, 2024, to stockholders of record as of September 13, 2024.
WM pays an annual dividend of $3, which translates to a yield of 1.47% at the current share price. Its four-year average dividend yield is 1.59%. Moreover, the company’s dividend payouts have increased at a CAGR of 9% over the past three years. WM has raised its dividends for 20 consecutive years.
On June 3, WM and Stericycle, Inc. (SRCL), a Leader in Medical Waste Services, entered into a definitive agreement under which WM will acquire all outstanding shares of Stericycle for $62 per share in cash, representing a total enterprise value of approximately $7.2 billion including $1.4 billion of net debt.
The strategic acquisition expands WM’s environmental solutions in the healthcare market while advancing WM’s sustainability commitments. It provides a complementary business platform and is expected to be accretive to WM’s earnings and cash flow.
WM’s operating revenues for the second quarter that ended June 30, 2024, increased 5.5% from the prior year’s quarter to $5.40 billion, and its adjusted income from operations grew 13.6% from the year-ago value to $1.08 billion. The company’s adjusted net income and EPS came in at $732 million and $1.82, up 18.6% and 20.5% year-over-year, respectively.
Further, the company’s adjusted operating EBITDA increased 10.3% from the year-ago value to $1.62 billion.
Analysts expect WM’s EPS for the third quarter (ending September 2024) to increase 15.7% year-over-year to $1.89, and its revenue is estimated to grow 6.1% year-over-year to $5.52 billion for the same period. Moreover, WM topped the consensus EPS estimates in three of the trailing four quarters.
WM’s stock has surged 2.1% over the past month and 32.4% over the past year to close the last trading session at $208.46.
WM’s POWR Ratings reflect its robust prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
WM has a B grade for Stability and Quality. It is ranked #3 among the 13 stocks in the same industry.
Click here to access additional WM ratings for Sentiment, Momentum, Value, and Growth.
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WM shares were trading at $208.25 per share on Tuesday afternoon, down $0.21 (-0.10%). Year-to-date, WM has gained 17.12%, versus a 16.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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