Here's Why Casella Waste (CWST) Is An Attractive Stock To Own

Casella Waste Systems, Inc. (NASDAQ:CWST) currently seems to be a smart choice for investors seeking exposure in the pollution control space. The company enjoys benefits from acquired assets and solid demand for its services. Also, positive revision in its earnings estimates reflects its healthy growth prospects.

The Rutland, VT-based solid waste service provider currently has a market capitalization of $2 billion. It presently has a Zacks Rank #2 (Buy) and a VGM Score of B. The company belongs to the Zacks Pollution Control industry. Stringent government regulations, pollution-related risks and growing demand in emerging nations are aiding providers of pollution control equipment and services.

Notably, Casella Waste reported better-than-expected results in third-quarter 2019, with earnings surpassing estimates by 15.63%. Also, it delivered average positive earnings surprise of 1.36% in the last four quarters.

Year to date, the company’s shares have gained 47.5% compared with the industry’s growth of 36.8%.

Below we discussed why investing in Casella Waste will be a smart choice.

Revenue Growth Prospects: The company’s focus on providing integrated waste services — including disposal, recycling and providing customer solutions — has earned it a competitive edge in the industry. Also, a solid network for transferring waste to processing and disposal facilities is a boon.

In the last three years (2016-2018), the company’s revenues grew 5.4% (CAGR), while a year-over-year increase of 14.9% was recorded in third-quarter 2019. Results benefited from strengthening customer solutions volume, effective pricing and recycling activities. Also, gains from acquired assets (explained below) boosted results.

For 2019, the company anticipates revenues of $735-$745 million, higher than $720-$735 million stated previously. Also, the revised projection reflects year-over-year growth of 11-13%, benefiting largely from acquired assets as well as healthy contributions from customer solutions, solid waste and recycling activities.

The Zacks Consensus Estimate for Casella Waste’s revenues is pegged at $742.9 million for 2019 and $811 million for 2020, suggesting year-over-year growth of 12.5% and 9.2%.

Outlook, Earnings Estimates: In addition to the top line, the company provided impressive projection for adjusted earnings before interest, tax, depreciation and amortization (EBITDA). It now expects EBITDA of $154-$157 million versus previously stated $153-157 million.

Also, the company predicts improved cash position for 2019. It expects net cash generated from operating activities of $114-$117 million, higher than $111-$115 million stated earlier. Casella Waste anticipates free cash flow (normalized) of $52-$55 million versus $51-$55 million mentioned previously.

We believe that improved projections have created positive sentiments for the company’s growth prospects. In the past 30 days, the Zacks Consensus Estimate for Casella Waste’s earnings per share has been raised 2.4% to 85 cents for 2019 and 1% to $1.01 for 2020.

Casella Waste Systems, Inc. Price and Consensus