Illustration by Elias Stein
Goldman Sachs thinks it’s time to buy garbage stocks—literally. This past week, Goldman’s Jerry Revich launched coverage of
and
all with Buy ratings. Waste haulers have two things going for them. There aren’t many of them per municipality. And there isn’t much waste-processing infrastructure like landfills either, which folks aren’t crazy having around. As regions grow, companies haul more on a relatively fixed infrastructure.
Or as Revich writes: “Every ton of trash is 20% to 25% more profitable for public companies today than in 2008.” Often, haulers take their growing profits and buy smaller, regional hauling companies. “The top four solid-waste players now account for 56% of U.S. landfill industry volumes, compared to 38% in 2008,” he adds.
Waste Connections, Waste Management, and Republic shares have returned 22%, 20%, and 19% annually, on average, respectively, for the past five years—versus the
S&P 500’s
17% a year. That means higher multiples, but not too high. Waste Connections trades at 33 times estimated 2021 earnings, against its five-year average of 28 times; Waste Management, 25 times 2021 profits, versus 22; and Republic, 25 times, versus 23. Revich’s price targets: $145 (WCN), $124 (WM), and $117 (RSG), some 10%, 11%, and 14% above recent levels.
Still, garbage stocks aren’t that popular on Wall Street. Republic and Waste Management get a Buy from around half the analysts rating them—compared with 60% for the average Dow industrials stock. Waste Connections breaks the mold: Almost 90% say Buy.
Last Week
Spring Fever
Stocks rolled after a blowout pre-Easter jobs report, then regrouped, then rose again, setting another S&P 500 record. Optimism was the order of the day, as the threat of rising bond yields seemed to ebb, funds flowed from emerging markets, and the International Monetary forecasted record global growth this year. An out-of-step negative: the second week of rising initial jobless claims. On the week, the
rose 1.95%, to 33,800.60; the S&P 500 advanced 2.71%, to 4128.80; and the
popped 3.12%, to 13,900.19.
Tax Talk
Treasury Secretary Janet Yellen pitched a global minimum tax as a key part of funding President Biden’s $2.3 trillion infrastructure program. A global tax would reduce “race-to-the-bottom” global corporate tax reductions, she said. Meanwhile, Democrats planned to push the infrastructure bill through the Senate on reconciliation, avoiding a 60-vote approval. But West Virginia Sen. Joe Manchin said he would only support corporate taxes rising to 25% from 21%, not 28%.
Amazon Wins Union Vote
Amazon.com won a closely watched unionization vote of Alabama warehouse workers, with some 59% of 3,041 workers voting not to join the union. The Retail, Wholesale, Department Store Union said that it would appeal the decision to the National Labor Relations Board.
Archegos Fallout
Credit Suisse announced a $4.7 billon loss on the Archegos selloff. The Swiss bank, which also took a loss on the Greensill Capital collapse, fired its chief risk officer and investment banking head, suspended its buyback program, reduced its dividend, and killed bonuses for CEO Thomas Gottstein, and the executive board. Gottstein was hired a year ago after his predecessor, Tidjane Thiam, was caught spying on departed executives.
Back to the Movies
Godzilla vs. Kong marked the return of Americans to the movies. The monster mashup, from Warner Brothers and Legendary Pictures, sold $32 million in tickets over Easter weekend and $48.5 million in its first five days, for an international total of $285 million, the best movie opening since March 2020.
Annals of Deal Making
Oil and gas producer Pioneer Natural Resources announced it was buying DoublePoint Energy for $6.4 billion…Bankrupt car rental company Hertz Global agreed to a plan from a consortium of Centerbridge Partners, Warburg Pincus, and Dundon Capital Partners …Softbank Group will lead a $1.2 billion convertible-bond investment in genetic testing concern Invitae, buy 40% of Norwegian warehouse-automation company AutoStore, and invest $500 million in mortgage lender Better…CVC Capital Partners made a buyout proposal to Toshiba, which would value the company at some $20 billon.
Write to Al Root at allen.root@dowjones.com
