The problem of household waste disposal has been known for hundreds, even for thousands of years. It was rubbish heaps that caused the pollution of European cities during the Middle Ages and the source of the spread of dangerous diseases. 

The origin of waste management

   For the first time, garbage as a source of raw materials drew attention to the United States in the second half of the 19th century. The growth of industrial production led to a deterioration in the situation, and the amount of solid waste increased many times over.

   Nowadays, thanks to the work of implicated specialists and just concerned people, acting in commonwealth, a phenomenon of waste management was created. Waste management is the activities and actions required to manage waste from its inception to its disposal. This includes the collection, transport, treatment and disposal of waste, together with monitoring and regulation of the waste management process.   

   There are eight major categories of waste management, and each of them can be divided into numerous sub-categories. The categories include: 

  • source reduction and reuse, 
  • animal feeding, 
  • recycling, 
  • composting, 
  • fermentation, 
  • landfills, 
  • incineration, 
  • land application.

First waste recycling plants in the United States

   The process of removal and further processing of different types of waste and garbage in USA is an effective solution to various environmental issues and, in addition, it is also considered a fairly profitable and safe business.  A huge number of different programs have been developed in the country, which by themselves give excellent results in stimulating the processing of household waste. By the end of 2021, it is planned to raise the bar to 20 million tons of recycled waste per year. And in order to actually implement this plan, a special instance was created in the United States called Waste Management, which occupies one of the very first positions in the world regarding issues of scientific research, as well as investments in this area of ​​the US national economy.

   In the United States, at the end of the 19th century, enterprising citizens came to the conclusion that garbage collection and recycling is a profitable business. So, in 1895, the world’s first waste pre-sorting system was launched in New York. With the appointment of retired Colonel George Waring as “garbage chief” in New York, the townspeople were obliged to separate organic waste, paper, metal and dispose of them in separate containers. Waste could be resold and received additional income for the city budget. It is not surprising that even before the beginning of the 20th century, the world’s first waste recycling plant was built in New York.

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   A modern waste processing plant must solve the following set of tasks:

  • to reduce the mass of solid waste, to stop the growth of the area of landfills for storage;
  • ensure sorting and storage prior to processing;
  • get useful materials at the exit;
  • do not harm the environment;
  • ensure the profitability of the business.

Three whales of the US waste management

   Thereby, let’s take a look at three US companies with steady growth in dividend payments and share prices.

Waste Management (WM)

  1. Waste Management (WM) provides waste management and recycling services to residential, industrial and municipal organizations in North America. As of the end of 2020, it owns 263 solid waste landfills, 5 hazardous waste landfills, 348 transfer stations, 147 recycling centers. Its CORe plants recycle industrial food waste to generate clean energy.

Capitalization – $ 46 billion

Financial performance:

   Revenue is growing from year to year. About 75% of the company’s sales are government orders. This factor helps to keep stable cash flows regardless of the current state of the economy.

   The consensus forecast for revenue growth by the end of 2021 is 10.7%. Earnings per share growth – 26%.

Republic Services (RSG)

  1. Republic Services (RSG) provides non-hazardous solid waste collection, transportation, disposal, and recycling services in 41 US states and Puerto Rico. Services include: roadside waste collection and transportation, garbage cans supply, waste disposal. RSG is also engaged in the processing and sale of corrugated packaging, newsprint, aluminum, glass. Republic Services is the second largest operator of non-hazardous waste in the United States. Among the investors in the company are Bill Gates and his investment company Cascade.
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   Capitalization – $ 25 billion

   Financial performance:

   Republic Services’ portfolio of services delivers consistent revenue. The consensus forecast for sales growth by the end of 2021 is 5.6%, by 2022 – 3.9%. EPS is projected to grow 18% in 2021.

ABM Industries (ABM)

  1. ABM Industries (ABM) is a global provider of cleaning, projections of premises, parking, security, landscaping services for a wide customer base: schools, commercial buildings, hospitals, factories, airports. The company was founded in 1909 and is headquartered in New York.

Capitalization – $ 2.9 billion

Financial performance:

   In 2020, sales decreased by 7.8%. About 50% of the company’s revenue comes from clients from sectors affected by the pandemic: industry, aviation, business centers. Many companies still have their offices remotely or open with a minimum number of employees, which negatively affects sales of ABM’s services.

   At the same time, ABM’s operating model remains robust, with efficient cost management. The plans for profit growth in 2021 are higher than the level of 2019. In 2022, the company plans to show EPS growth by 6.7%, and revenue growth by 3.3%.

The US garbage market’s development prospects: to invest or not to invest

   The garbage market in the United States is very closed, and there are not many companies associated with it, analysts at Goldman Sachs write. They are scattered throughout the country, working in different municipalities. At the same time, the four largest players in the United States – Republic Services (RSG), Waste Connections (WCN), Waste Management (WM), ABM Industries (ABM) – control about 54% of the total market, although in 2008 their share did not exceed 38%. Consolidation, according to Goldman Sachs analysts, is one of the main advantages of the garbage market – it generates profit for the sector. For 15 years, these three companies have increased their profits annually by about 5% through the acquisition of smaller players.

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For example, in a market served by one player, the cost of collecting and recycling waste can be $ 30 per house. In the unconsolidated market, costs will be higher – about $ 40 per house, analysts at a US bank have calculated. Thus, market consolidation increases the margins of large companies by about 5-10%. Goldman Sachs predicts further consolidation of this market, as large waste processing companies use the accumulated funds to buy smaller regional waste carriers.

Another factor also affects the profits of garbage companies – a small number of infrastructure facilities associated with garbage, analysts at Goldman Sachs say. Landfills and recycling stations are not needed in large numbers, they are often owned by large players and are located at great distances from each other. As regions and populations grow, their consumption and waste increases. Thus, one landfill or recycling station now accounts for 400,000 tons of waste, five years ago – 370,000 tons. Despite the increase in waste volumes, the cost of maintaining the infrastructure does not increase.

   As a result, the margin of garbage collection and recycling is growing: a ton of garbage is now 20-25% more profitable than in 2008, analysts at Goldman Sachs conclude.

   At the same time, not all financiers believe that it should buy shares of American companies from the garbage industry. Republic Services, Waste Connections and Waste Management are examples of boring companies and great choices when looking for conservative stocks that pay off solid dividends, specialists write. Their shares do not have significant upside potential, which has slowed in the past few years.

   However, the companies’ garbage and recycling businesses tend to be resilient, and they tend to grow as garbage volumes, pricing and mergers & acquisitions deals, other experts say. According to the most optimistic of them, in 2020 the garbage business was negatively impacted by the pandemic, but is now on the verge of recovery. Therefore, the growth prospects of such companies may be no worse than that of the market as a whole, and even better for some leading companies. Also, as we said, some of these companies may have decent dividend yields.

1 COMMENT

  1. I’m so happy that world finally realize, it’s impossible to survive without environment care. We should always remember about our carbon footprint and fix our consumer behavior.

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