The pre-pandemic phase had seen clean-up companies generate stable revenues and cash flows from customers across diverse industries and pay out stable dividends, making waste management stocks robust defensive players.
However, with most business operations coming to a near standstill due to the pandemic, waste production from industrial and commercial sectors declined drastically, sending waste management companies far down their full-scale capacities. This decline was, however, partially offset by an increase in municipal waste from residential areas and medical centers. With the gradual reopening of the economy and resumption of business activities, the industry has been gathering steam lately.
How Will 2022 Shape Up for Clean-Up Companies?
Proper disposal of medical waste remains the utmost priority to curb the spread of coronavirus. In fact, waste management companies are at an advantage as healthcare officials have to dispose of used masks, gloves, suits, syringes and other medical equipment properly to curb the spread of infection. Government initiatives as well as stringent rules and regulations to advance sustainable waste management mechanisms and put a check on illegal dumping are also expected to boost the industry in 2022.
An increase in population, industrialization and urbanization will remain key drivers of the industry as it prompts a significant rise in garbage and recycling. Also, technology adoption and the use of advanced collection and recycling solutions are expected to pick up pace. This should enhance business opportunities for waste management companies.
Investing in stocks like Republic Services (NYSE:RSG), Inc. RSG, Waste Connections (NYSE:WCN), Inc. WCN, Core & Main, Inc. CNM and Montrose Environmental Group, Inc. MEG seems a prudent move.
According to a Allied Market Research report, the global waste management market is expected to reach $2,483.0 billion by 2030 from $1,612.0 billion in 2020, witnessing a CAGR of 3.4% from 2021 to 2030.
4 Waste Management (NYSE:WM) Stocks Set to Fly High Next Year
Given this encouraging backdrop, it would be a good idea to zero in on clean-up companies that have strong growth potential for 2022. The buoyancy in the industry is further confirmed by its Zacks Industry Rank #69, which places it in the top 27% of more than 250 Zacks industries. This indicates solid near-term growth prospects.
We have picked four waste management stocks, which are set to perform well in 2022 and are backed by a Zacks Rank #1 (Strong Buy) or #2 (Buy). These stocks have been up more than 20% so far this year, have a market capitalization of more than $1 billion and are witnessing positive revisions. You can see the complete list of today’s Zacks #1 Rank stocks here.
Core & Main: This Zacks Rank #1 Missouri-basedcompany distributes water, wastewater, storm drainage, and fire protection products and related services to municipalities, private water companies, and professional contractors in the municipal, non-residential, and residential end markets in the United States.
Core & Main has been benefiting from solid demand across each of its end markets, backed by continued growth in municipal water infrastructure spending, growth in land and development due to continued housing demand, and recovery in the non-residential construction market. Despite ongoing inflationary trends across many of its product lines due to supply chain constraints and product availability challenges, the company kept floating through its reliable products and services. Core & Main’s active M&A strategy has been helping it expand into new geographies, access new product lines, consolidate existing market positions and add key talent. In addition, higher net sales and cost-control initiatives will likely drive margins.
Core & Main’s shares have appreciated 21% so far this year. The Zacks Consensus Estimate for Core & Main’s 2022 EPS has moved up 22.9% in the past 90 days. It has a market capitalization of $6.65 billion.
Waste Connections: This Zacks Rank #2 Canada-based company provides waste collection, transfer, disposal, and recycling services in the United States and Canada.
A sequential improvement in solid waste volumes and increased recovered commodity values has been aiding Waste Connections’ top line. The company's focus on secondary and rural markets to garner a higher local market share is appreciable. The company has optimal asset positioning to generate higher profitability. Acquisitions have been helping Waste Connections to expand globally and strengthen its product portfolio. Further, Waste Connections’ board of directors has hiked its quarterly dividend by 12.2% from 20.5 cents per share to 23 cents per share. This reflects Waste Connections’ 11th consecutive double-digit percentage increase since the initiation of dividend payment in 2010. The increased dividend was paid out on Nov 23, 2021, to shareholders of record at the close of business on Nov 9.
Waste Connections’ shares have appreciated 27.2% so far this year. The Zacks Consensus Estimate for WCN’s 2022 EPS has moved up 3.4% in the past 90 days. It has a market capitalization of $33.64 billion.
Republic Services: This Arizona-based Zacks Rank #2 company provides non-hazardous solid waste collection, transfer, disposal, recycling, and environmental services in the United States.
The positive impact of acquisitions and average yield has been aiding Republic Services’ top-line growth. The company is focused on increasing its operational efficiency by shifting to compressed natural gas collection vehicles and converting rear-loading trucks to automated-side loaders to reduce costs and improve profitability. Republic Services continues to grow internally with the help of long-term contracts for the collection, recycling and disposal of solid waste materials. Consistency in dividend payments and share buybacks not only boost investor confidence but also positively impact earnings per share.
Republic Services’ shares have appreciated 39.2% so far this year. The Zacks Consensus Estimate for Republic Services’ 2022 EPS has moved up 3.2% in the past 90 days. It has a market capitalization of $42.29 billion.
Montrose Environmental Group: This Zacks Rank #2 California-basedcompany operates as an environmental services company in the United States.
Montrose’s top line has been benefiting fromorganic growth in its Assessment, Permitting and Response and Remediation and Reuse segments. It is also gaining from acquisitions like that of MSE Group, LLC in January 2021, Vista Analytical Laboratory (NYSE:LH), Inc. in June 2021, and Environmental Intelligence, LLC in July 2021. The company recently completed its two financially accretive transactions — Environmental Chemistry, Inc. in October 2021 and Horizon Water and Environment, LLC in November 2021. Montrose’s acquisition strategy helps it expand its capabilities and expand its footprint.
Montrose’s shares have appreciated 129.2% so far this year. The Zacks Consensus Estimate for Montrose’s 2022 EPS has moved up more than 100% in the past 90 days. It has a market capitalization of $2.05 billion.
Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022?
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Republic Services, Inc. (RSG): Free Stock Analysis Report
Waste Connections, Inc. (WCN): Free Stock Analysis Report
Montrose Environmental Group, Inc. (MEG): Free Stock Analysis Report
Core & Main, Inc. (CNM): Free Stock Analysis Report
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