Covanta Holding's Focus On Technology Development Bodes Well

Covanta Holding Corporation’s (NYSE:CVA) focus on developing as well as commercializing new technology, systematic capital expenditures and development of total ash processing system are tailwinds.

The company has trailing four-quarter positive earnings surprise of 54.89% in the past four quarters. Long-term earnings growth of the company is pegged at 15%,

What’s Driving the Stock?

Over the past several years, Covanta Holding has been investing substantially to purchase property, plant and equipment. These expenditures were made to address infrastructural requirements and expand customer base for various capital projects. Moreover, the expenses were made to undertake acquisitions to curb competition, increase safety and reliability of its Energy-from-Waste (EfW) projects, provide solutions for solid waste and recyclable households besides hazardous wastes as well as modernize the system.

In 2019, the company invested $56 million in different growth projects. The company aims to invest nearly $35 million in different growth projects in 2020 to expand existing operations. This includes $10-million investments for strengthening international operations.

To lower long-term cost of ash disposal and become more sustainable while creating new revenue opportunities, the company has been developing its first total ash processing system (TAPS).

The company is also commercializing new technologies like recycling, alternative waste treatment processes, combustion controls, emission controls and residue recycling, reuse or disposal to develop existing operations. Covanta Holding is focused on preserving value of existing portfolio, expanding through project development and acquisitions in selected attractive markets as well as maintaining sustainability.

However, increased plant operating expenses, stringent laws and regulations in the United States and rising debt levels are headwinds for the company.

Zacks Rank & Price Performance

The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Covanta Holding have plunged 47.5% in the past 12 months compared with the industry’s decline of 43.3%.

Other Stocks to Consider

Few top-ranked stocks from the same sector are Evergy Inc. (NYSE:EVRG) , SolarEdge Technologies, Inc. (NASDAQ:SEDG) and BP (LON:BP) Midstream Partners LP (NYSE:BPMP) . SolarEdge Technologies sports a Zacks Rank #1, while SolarEdge Technologies and BP Midstream Partners hold a Zacks Rank #2.

Long-term earnings growth of Evergy, SolarEdge Technologies and BP Midstream Partners is pegged at 6.40%, 25% and 10%, respectively.

Evergy, SolarEdge Technologies and BP Midstream Partners have trailing four-quarter positive earnings surprise of 1.80%, 10.28% and 10.91%, on average, respectively.

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