Republic Services
This company remains a solid performer with a terrific underlying infrastructure. Revenue has been stagnant, rising just 0.8% year over year in the first quarter after being flat during the prior period. But net income during the first quarter was up 19% ex-items on internal growth and sequential improvement in core pricing and volume. And the results led the company to state in April that it remains on track to achieve its previously issued full-year guidance.
But this remains a long-term play because, like Waste Management, Inc. (NYSE:WM), Republic recognizes that its trash can ultimately be turned into treasure. It is accordingly laying the groundwork to stake a major claim in the business of converting waste into energy through incineration and tapping gases produced by landfills — a business that will only grow as technology and demand improve.
Two others to watch
Because the segment is looking so positive, two related firms should also be on investors’ radar. Each fulfills a slightly different need and does it well.
Stericycle Inc (NASDAQ:SRCL) is a leader in specialty disposals, particularly medical waste. Coming off a strong 2012 it reported first quarter revenues rose nearly 12% year over year — partly through acquisitions — while gross profit was up 13% and margins improved. Its stock has done as well as the Big 3 so far this year and may do even better now that Waste Management, Inc. (NYSE:WM) has announced it will no longer process medical waste itself and instead outsource that service to others like Stericycle Inc (NASDAQ:SRCL).
Clean Harbors Inc (NYSE:CLH) services disposal needs of several specialty industries, the most important being oil and gas. It, too, has been growing by acquisition and in the first quarter its revenue jumped 51% year over year thanks to its December purchase of a leading oil collection and environmental services firm. Income dropped because of the $1.25 billion deal, but the company says resultant synergies will provide a better than expected $70-$75 million in savings by the end of this year. A backlog of ongoing and upcoming projects also adds to optimism for the second half of 2013 and beyond.
The bottom line
Assuming the economic recovery continues and prices for recyclable commodities rebound somewhat, observers expect a return to double-digit volume growth for all players by next year. Pricing continues to improve and business direction appears to be solid.
My conclusion: the long-term outlook remains positive for this segment.
Howard Rothman has no position in any stocks mentioned. The Motley Fool recommends Republic Services, Inc. (NYSE:RSG), Stericycle Inc (NASDAQ:SRCL), and Waste Management, Inc. (NYSE:WM). The Motley Fool owns shares of Clean Harbors Inc (NYSE:CLH) and Waste Management, Inc. (NYSE:WM).
The article ‘Trash Talk’ Now Mostly Positive originally appeared on Fool.com.
Howard is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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