Time to Clean Up with These 3 Profitable Garbage Stocks

October 06, 2023 at 07:33 AM EDT

Garbage stocks

If there's one thing that will continue to compound and swell for as long as there are cities, communities and towns, it’s garbage. Trash, waste, junk, litter, rubbish, muck, and refuse colorfully describe garbage. The garbage collection and recycling industry is fragmented, split between local counties, municipalities and agencies who award the contracts.

The garbage business is centered around collection, transportation and disposal. Collection involves collecting garbage from residents and businesses via bins and receptacles and transporting it to the transfer stations or directly to landfills. Transportation takes the compiled trash from transfer stations in much larger trucks to travel long distances to landfills. Disposal is the final destination where garbage is buried in landfills or recycled.

The garbage business is both profitable and growing and has high barriers to entry in terms of capital and regulations. Here are 3 garbage stocks that may be a fit for your portfolio.

Waste Management Inc. (NYSE: WM)

The name sums up exactly what the company does. Waste Management is the largest garbage company in the country. It partakes in all stages of the industry in a vertically integrated fashion. Waste Management operates over 26,000 garbage trucks and vehicles transporting to over 340 transfer stations to over 290 landfills and more than 140 recycling facilities in the country. The company continues to discover innovative ways to reduce emissions of landfill waste and improve recycling and conversion of waste to energy.

Sustainability

Waste Management has seen growth in its renewable natural gas (RNG) segment, opening 20 new facilities. These landfill gas-to-energy projects convert methane, a greenhouse gas, from landfills to RNG. The facilities remove impurities and convert the methane gas into RNG. The processed methane gets injected into a natural gas pipeline network. These facilities are one way of expanding its footprint into the environmental, renewable and sustainable energy segment.

Earnings Miss and Lowered Guidance

Waste Management reported Q2 2023 earnings of $1.51 per share, missing analyst estimates by 4 cents. Revenues climbed 1.8% YoY to $5.12 billion, falling short of the $5.23 billion analyst estimates. Collection and disposal yield fell 5.85% from 6.2% in the year-ago quarter. Total collection and disposal volume grew 0.2% in the quarter.

The company cut full-year 2023 guidance to $18.86 to $19.06 billion versus $20.66 billion consensus analyst estimates. This is due to the sustainability business with lower natural gas and electricity prices than the previous year, and recycled commodity prices are expected to fall in the year's second half.

Waste Management analyst ratings and price targets are at MarketBeat.

Waste Management peers and competitor stocks can be found with the MarketBeat stock screener.

WMT stock price

Weekly Ascending Triangle Pattern

The weekly candlestick chart on WM shows an ascending triangle pattern. It commenced with a low of $135.98 in June 2022. Shares made higher lows to form the ascending trendline, while the flat-top horizontal trendline formed at $171.72.

The weekly market structure low (MSL) buy triggers above $161.95. The weekly relative strength index (RSI) is falling through the 40-band. Pullback support levels are $148.51, $144.54, $140.12 and $135.98.

Clean Harbors Inc. (NYSE: CLH)

Clean Harbors manages environmental and industrial waste materials, cleaning, and emergency spill service. The company services manufacturers, oil and gas companies, chemical companies, and government agencies. The company has over 400 service locations and 100 waste management facilities in North America to handle hazardous waste.

Clean Harbors has a team of more than 2,000 trained responders to help companies clean up and contain hazardous materials. The company has over 100 recycling facilities, recycling hazardous waste, electronic waste, and used oil in over 100 recycling facilities. It also provides industrial cleaning and maintenance services like cleaning out tanks, vacuuming and hydro blasting to keep facilities clean.

Solid Q2 2023 Numbers

The company reported earnings of $2.13, beating consensus analyst estimates of $2.09 per share. Revenues climbed 3.1% YoY to $1.4 billion, missing estimates of $1.42 billion. The company reaffirmed its full-year 2023 adjusted EBITDA guidance of $1.02 billion to $1.06 billion with cash flow at $305 million to $3.45 million.

Clean Harbors analyst ratings and price targets are at MarketBeat.

Waste Connections Inc. (NYSE: WCN)

Waste Connections is an integrated solid waste service company servicing customers in secondary and rural markets, which helps their pricing power. It’s the third-largest garbage company in the country. The company partakes in collecting, transporting and disposing of non-hazardous solid waste for municipal, industrial and residential customers. Waste Connections operates over 15,000 vehicles to collect trash from over 20 million customers. It also recycles materials ranging from paper, plastic, and metal to glass at its over 100 recycling facilities in the country. The company operates over 230 landfills across North America. Their landfills are designed and operated to protect the environment.

Supplementary Services

Waste Connections also has many supplementary services, which include shredding, portable toilet rentals and trash compactor sales and rentals. Trash compactors are suitable for high volume low-density waste streams like grocery stores. A compactor enables the disposal of four to five times more garbage in the same space.

Routine Earnings

Waste Connections earned $1.32 per share in Q2 2023, beating consensus analyst estimates by 1 cent. Revenues climbed 11.3% YoY to $8.05 billion, falling short of the $8.07 billion analyst estimates. The company lowered full-year 2023 revenues to $8.025 billion from $9.05 billion versus $8.07 billion consensus analyst estimates.

Waste Connections analyst ratings and price targets are at MarketBeat.

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