Waste Connections Hits 52-Week High On Balanced Growth

Shares of waste management services provider Waste Connections Inc. (NYSE:WCN) scaled a new 52-week high of $94.15 during yesterday’s trading session, before closing a tad lower at $93.80 for a solid year-to-date return of 37.6%. Barring minor hiccups, Waste Connections’ share prices have steadily been on an uptrend since October last year.

Despite its strong price appreciation, this Zacks Rank #2 (Buy) stock has room for further growth with long-term earnings growth expectation of 15.8%.

Growth Drivers

Waste Connections typically targets secondary and rural markets to garner a higher local market share, which would be difficult to attain in more competitive urban markets. In certain niche markets, like E&P (exploration & production) waste treatment and disposal, early mover advantage in certain rural basins play a key role in improving market positioning and generating higher financial returns, given the limited availability of existing third-party-owned waste disposal alternatives. The company focuses on increasing market penetration and offering additional services to capitalize on future drilling opportunities in these areas.

Waste Connections also aims to leverage its franchise-based platforms to expand customer base beyond the exclusive market territories. As customers are added in existing markets, revenue per routed truck rises, which in turn increases collection efficiencies and profitability.

With prime location of disposal sites within competitive markets, Waste Connections has optimal asset positioning to generate higher profitability. Given the importance of and costs associated with the transportation of waste to treatment and disposal sites, having disposal capacity proximate to the waste stream offers a competitive advantage and serves as a barrier to entry. An experienced management, decentralized operating strategy and financial strength remain additional tailwinds.

Waste Connections generally focuses on providing vertically integrated services, from collection through disposal of solid waste in landfills that it owns or operates. In addition, the operations are managed on a decentralized basis to place decision-making authority close to the customer, enabling it to identify and address customers’ needs on a real-time basis in a cost-effective manner. This low overhead, highly-efficient operational structure allows it to expand into geographically contiguous markets and operate in relatively small communities that other competitors may not find attractive.

All these measures for a relatively healthy growth impetus for the near future probably raised investor confidence and drove the shares to a 52-week high.

Other Stocks to Consider

Some other stocks worth considering in the industry include Republic Services, Inc. (NYSE:RSG) , CBIZ, Inc. (NYSE:CBZ) and Advanced Disposal Services, Inc. (NYSE:ADSW) , each carrying Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Republic Services has a long-term earnings growth expectation of 9.2%. It beat earnings estimates thrice in the trailing four quarters with a positive surprise of 3.6%.

CBIZ surpassed earnings estimates twice in the trailing four quarters with a positive surprise of 18.4%.

Advanced Disposal Services topped earnings estimates twice in the trailing four quarters with a stellar positive surprise of 227.8%.

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