By Thomas Kostigen
“One person’s trash is another person’s treasure.” Waste management companies have taken that saying to the bank.
Waste is nearly a half trillion-dollar industry. Leading companies such as Waste Management, Inc. and Republic Services, for example, have been growing in recent years — and with population growth, waste is expected to grow through 2025 at a compounded rate of six percent, according to Allied Market Research. Waste management is defined as the process of collecting, transporting, disposing, or recycling, and monitoring of waste.
Many investors look toward consumption patterns for buying ideas. As more people shelter in place, streaming services, delivery businesses and videoconferencing companies become obvious opportunities. What about the other side of consumption, though?
Waste management companies are typically thought of as recession proof. However, the coronavirus may be altering that perception for the time being. “The [pandemic’s] impact is more akin to a hurricane—activity stops and people hunker down in place, but now across large swathes of the country. In hard-hit ‘shelter in place or stay at home’ areas, commercial activity is reported down as much as 50 to 60 percent,” the industry website Waste360 notes.
Commercial collections are more profitable than residential trash pick-ups because businesses pay by weight whereas residences pay by service. Higher residential volumes therefore don’t add up to more revenue. And with businesses shut, revenues are crimped even more.
Still, the pandemic has prompted some municipalities to relax costly environmental treatment and recycling rules. And that could prove positive for waste management companies, granted at a price to the planet. Additionally, many businesses that are still operating are opting for plastic packaging and single use materials due to the coronavirus. As Waste360 reports, Starbucks, Dunkin’, Tim Hortons and McDonald’s have suspended their reusable cup programs. That means more solid waste.
And medical waste is piling up, too. While most medical waste is incinerated onsite at hospitals, masks, gloves and sanitary equipment that have been scooped up by business for employees is ending up in regular waste bins rather than handled as normal medical waste.
If the economy opens again relatively soon, waste management companies will likely have built numerous efficiencies, and margin could improve quickly. Waste management companies even prior to the pandemic were adopting better recycling techniques, developing innovative technologies, as well as advanced waste collection solutions to enhance collection processes. Smart waste management companies will stay that course and at the same time work with commercial customers whose businesses have shut to rewrite contracts in the face of these unusual events. And it’s likely that environmental rules will continue to lag.
Over the longer term, once businesses are back up and running, waste management could prosper as more people will likely look to use disposable rather than reusable goods.
Our environment—which is enjoying a reprieve from pollution and carbon emissions as people shelter in place— will likely suffer once the economy gets rolling again. There are a lot of variables for waste management companies. A professional financial advisor can help investors wade through the pickings.
Thomas Kostigen is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.
