With the growing population worldwide and rapid industrialization, waste disposal solutions should witness a significant surge in demand. Furthermore, supportive government initiatives and widespread technological adoption are expected to boost the waste management industry’s expansion.
Considering the industry’s bright growth prospects, it could be wise to invest in fundamentally sound waste disposal stocks Waste Management, Inc. (WM), Clean Harbors, Inc. (CLH), and Heritage-Crystal Clean, Inc (HCCI) for potential gains.
The global demand for waste management services is expected to grow exponentially, driven by rapid industrialization and urbanization worldwide. In the U.S., an average of more than 1,700 pounds of food, plastic, and hazardous waste per person is produced. In addition, favorable government policies and investments should drive the waste disposal industry’s growth.
For instance, the Resource Conservation and Recovery Act (RCRA) allows the EPA to control hazardous waste from cradle to grave. This comprises the generation, transportation, treatment, storage, and disposal of hazardous waste. Also, RCRA set a framework for the management of non-hazardous solid wastes.
According to a report by Grand View Research, the global waste management market is expected to reach $2 trillion by 2030, growing at a 5.4% CAGR.
Furthermore, growing awareness regarding proper and effective waste disposal for maintaining animal and human health led to the emergence of various advanced and innovative disposal methods and techniques. Numerous advancements in IoT and AI-based technologies boost waste management operations, reducing costs and enabling better decision-making.
In addition to being more efficient and cost-effective, smart waste management solutions are expected to be environmentally friendly. As per a report by IMARC Group, the global smart waste management market size is projected to reach $5.30 billion by 2028, growing at a 13.9% CAGR.
Against the backdrop, investing in robust waste disposal stocks WM, CLH, and HCCI seems wise for solid returns.
Let’s take a closer look at the fundamentals of these stocks:
Waste Management, Inc. (WM)
WM provides environmental solutions to residential, commercial, industrial, and municipal customers in the United States and Canada. The company offers collection services; owns and operates transfer stations; and owns, develops, and operates landfill facilities. It owns or operates more than 254 solid waste landfills and 337 transfer stations.
WM’s trailing-12-month gross profit margin of 37.39% is 25.3% higher than the industry average of 29.83%. And the stock’s trailing-12-month EBITDA margin of 27.74% is 105.6% higher than the 13.50% industry average. Also, its trailing-12-month net income margin of 11.33% compares to the industry average of 6.35%.
For the first quarter that ended March 31, 2023, WM’s revenue increased 5% year-over-year to $4.89 billion. The company’s income from operations grew 3.1% from the prior-year period to $828 million. Its adjusted operating EBITDA rose 3.7% year-over-year to $1.33 billion. In addition, its adjusted EPS came in at $1.31, a 1.6% increase from the prior-year quarter.
The consensus revenue estimate of $20.67 billion for the fiscal year (ending December 2023) reflects a 5% year-over-year improvement. Likewise, the consensus EPS estimate of $6.04 for the ongoing year indicates an 8% rise year-over-year. Moreover, the company surpassed its consensus revenue and EPS estimates in three of the trailing four quarters.
In addition, analysts expect WM’s revenue and EPS for the fiscal year 2024 to grow 5.7% and 11.8% year-over-year to $21.85 billion and $6.75, respectively.
Over the past six months, the stock has gained 9.2% and 11.6% over the past year to close the last trading session at 168.56.
WM’s strong 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 POWR Ratings assess stocks by 118 different factors, each with its own weighting.
WM has a B grade for Stability and Quality. Within the Waste Disposal industry, it is ranked #6 of 15 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see WM’s ratings for Growth, Value, Sentiment, and Momentum here.
Clean Harbors, Inc. (CLH)
CLH provides environmental and industrial services in the United States and internationally. The company operates in two segments: Environmental Services and Safety-Kleen Sustainability Solutions. Its customer base spans various industries, such as chemical and manufacturing, and numerous government agencies.
Based on its positive market outlook, CLH remains highly excited about its prospects for 2023.
“We see tangible momentum and strong demand across all of our key ES businesses. In particular, within Industrial Services, we completed the acquisition of Thompson Industrial on March 31. We’re moving quickly to integrate that business, and we expect it to add approximately $80 million of revenue and $9 million of Adjusted EBITDA during the final three quarters of 2023,” said CLH’s CEO, Eric Gerstenberg.
CLH’s trailing-12-month gross profit margin of 31.53% is 5.7% higher than the industry average of 29.83%. Likewise, the stock’s trailing-12-month EBITDA and net income margins of 19.16% and 8.27% compare to the respective industry averages of 13.50% and 6.35%.
CLH’s revenues grew 12% year-over-year to $1.17 billion in the first quarter that ended March 31, 2023. Its adjusted EBITDA was $215.14 million, up 19.4% year-over-year. The company’s adjusted net income and adjusted EPS increased 63.1% and 63.9% from the prior-year period to $74.11 million and $1.36, respectively.
Analysts expect CLH’s revenue and EPS for the fiscal year (ending December 2024) to increase by 4.1% and 9.7% year-over-year to $5.72 billion and $7.83, respectively. Moreover, the company topped its consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
Shares of CLH have gained 34.9% over the past six months and 45.3% year-to-date to close the last trading session at $165.27.
CLH’s POWR Ratings reflect its solid outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
CLH has a grade B for Value, Quality, and Sentiment. In the 15-stock Waste Disposal industry, it is ranked first.
Beyond what we stated above, we also have CLH’s ratings for Stability, Growth, and Momentum. Get all CLH ratings here.
Heritage-Crystal Clean, Inc (HCCI)
HCCI provides parts cleaning, hazardous and non-hazardous waste, and used oil collection services to small and mid-sized customers in the industrial and vehicle maintenance sectors in North America. It operates through two segments, Environmental Services and Oil Business.
On January 31, HCCI announced a new partnership with Allonnia, Revive Environmental, and EPOC Enviro to launch a groundbreaking closed-loop PFAS remediation solution called 4never™. This collaboration might offer innovative and effective remediation strategies for managing PFAS in the waste disposal and industrial settings.
In terms of the trailing-12-month EBITDA margin, HCCI’s 20.20% is 49.7% higher than the 13.50% industry average. Moreover, the stock’s trailing-12-month net income margin of 11.59% is 82.6% higher than the 6.35% industry average.
During the first quarter that ended March 31, 2023, HCCI’s revenues increased 38.8% year-over-year to $193.48 million. Its operating income grew 36.9% from the year-ago value to $24.02 million. Also, the company’s net income totaled $16.59 million, up 28.8% year-over-year. Its net income per share was $0.70, an increase of 29.6% year-over-year.
Analysts expect HCCI’s revenue to increase 5.4% year-over-year to $823.37 million in the fiscal year ending December 2024. The company’s EPS for the current year is expected to grow 16.5% from the prior year to $2.98. In addition, the company surpassed the revenue and EPS estimates in each of the trailing four quarters.
Shares of HCCI have gained 26.4% year-to-date and 53.3% over the past year to close the last trading session at $41.32.
HCCI’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
HCCI has a B grade for Value and Sentiment. It is ranked #2 out of 15 stocks in the same industry.
To access additional ratings for HCCI’s Growth, Quality, Stability, and Momentum, click here.
What To Do Next?
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WM shares were trading at $168.69 per share on Monday morning, up $0.13 (+0.08%). Year-to-date, WM has gained 8.50%, versus a 18.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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