Rapid population growth, globalization, industrialization, and technological advancements have fueled a substantial rise in waste generation. With waste management gaining greater significance, grabbing sound waste disposal stocks Republic Services, Inc. (RSG) and Clean Harbors, Inc. (CLH) could be a wise move to capitalize on this trend. Let us understand in detail.
Rapid population growth, globalization, and industrialization in emerging economies have driven a significant increase in global waste. Industries such as chemicals, oil & gas, automobiles, and medical sectors generate vast amounts of waste, contributing to pollution and environmental concerns.
In addition, the rapid advancement of technology has led to a mounting issue of e-waste. E-waste encompasses discarded electronic devices that have become obsolete or reached the end of their useful life. With the constant production and disposal of electronic devices, the problem of electronic waste continues to grow.
In recent decades, global waste generation has experienced a significant and alarming surge, with no indications of this trend slowing down. The worldwide municipal solid waste generation is estimated to soar by approximately 70%, reaching an astonishing 3.40 billion metric tons by 2050.
As one of the leading waste producers globally, the United States has a significant focus on waste management and has taken various initiatives in this regard. The Resource Conservation and Recovery Act (RCRA) empowers the Environmental Protection Agency (EPA) to regulate hazardous waste throughout its lifecycle, from generation to disposal.
Moreover, under the Bipartisan Infrastructure Law, the EPA has implemented waste prevention and recycling programs to enhance recycling infrastructure and promote sustainable practices.
According to Statista, the global waste management market was valued at $1.3 trillion in 2022 and is projected to grow at a 5.4% CAGR reaching $1.96 trillion in 2030.
The NASDAQ US Benchmark Waste & Disposal Services Index’s 28.4% return in the past six months highlights investors’ interest in waste disposal stocks. In light of this, let’s take a closer look at quality waste disposal stocks RSG and CLH.
Republic Services, Inc. (RSG)
RSG is an environmental services provider that offers a wide range of products and services, such as recycling, solid waste, hazardous waste, container rental, and field services. The company operates approximately 73 landfill gas-to-energy and other renewable energy projects. It also has post-closure responsibility for 128 closed landfills.
On March 27, RSG acquired North State Bioenergy, an anaerobic digestion facility located north of Sacramento, in a move that significantly expands its organics recycling operations in California. This would also aid RSG’s customers meet California’s climate strategy and sustainability goals.
Moreover, on February 20, RSG announced a deal with Oshkosh Corporation (OSK) to expand its electric truck fleet, with two prototypes expected to begin operation in autumn. Over the next five years, the company aims for EVs to comprise 50% of its new truck purchases, with the partnership speeding up the transition while providing enhanced safety features and tech.
During the first quarter that ended March 31, 2023, RSG’s revenue increased 20.6% year-over-year to $3.58 billion. Its adjusted EBITDA grew 15.1% from the year-ago value to $1.04 billion. In addition, the company’s net income and EPS grew 9.1% and 9% year-over-year to $383.90 million and $1.21, respectively.
The consensus revenue estimate of $14.88 billion for the fiscal year ending December 2023 reflects a 10.2% year-over-year improvement. Likewise, the consensus EPS estimate of $5.27 for the current year indicates a growth of 7% year-over-year.
Moreover, the company surpassed the consensus revenue and EPS estimates in all four trailing quarters, which is quite impressive.
Over the past three months, the stock has gained 16.4% to close the last trading session at $148.19.
RSG’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
RSG has a B grade for Quality, Stability, and Sentiment. It is ranked #3 in the A-rated 15-stock Waste Disposal industry.
In addition to the POWR Ratings I’ve just highlighted, you can see RSG’s ratings for Value, Growth, and Momentum here.
Clean Harbors, Inc. (CLH)
CLH is an environmental and industrial services provider. It recycles used oil and provides cleaning parts and related environmental services to commercial, industrial, and automotive customers. The company operates through two segments, Environmental Services; and Safety-Kleen Sustainability Solutions.
On March 31, CLH acquired Thompson Industrial Services from MSouth Equity Partners and Five Points Capital for approximately $110 million in an all-cash deal. The acquisition would enable CLH to expand its reach in the southeast, where it had not previously offered industrial services, and reinforce its position in areas where it already provides environmental services.
For the first quarter that ended March 31, 2023, CLH’s revenues increased 11.8% year-over-year to $1.31 billion. Its adjusted EBITDA grew 19.3% from the year-ago value to $215.14 billion. Also, the company’s adjusted net income and EPS rose 63.1% and 63.9% year-over-year to $74.11 million and $1.36, respectively.
Analysts expect CLH’s revenue to increase 4.1% year-over-year to $5.27 billion for the fiscal year ending December 2024. The company’s EPS for the same year is expected to rise 9.8% year-over-year to $7.83. Furthermore, the company surpassed the consensus revenue and EPS estimates in all four trailing quarters.
Shares of CLH have gained 57% over the past year to close the last trading session at $138.51.
CLH’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
CLH has a B grade for Value, Quality, and Sentiment. It has topped the 15-stock Waste Disposal industry.
Click here to access additional CLH ratings for Stability, Growth, and Momentum.
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RSG shares were trading at $147.88 per share on Monday morning, down $0.31 (-0.21%). Year-to-date, RSG has gained 15.07%, versus a 8.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...
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