Garbage collection giant Waste Management (WM) reported strong earnings and sales that topped forecasts Thursday. Rival Waste Connections (WCN) reported solid results Wednesday. Another waste disposal firm, Republic Services (RSG), did the same last week.
All three stocks are trading near record highs and have each gained about 20% over the past year, which is much better than the overall market. The Dow and S&P 500 are only up about 2%.
Republic Services CEO Don Slager told CNN Business that a key reason the industry is doing so well is because of the healthy US economy: When people buy more stuff, they throw out more things, too.
Better contract pricing
That leads to more garbage and recycling to be picked up. It also means that Republic Services and its rivals can getter better pricing on new contracts with municipalities and private businesses.
"The outlook is great. Everybody is looking forward to a solid 2019," Slager said, noting that the company was able to negotiate for the biggest pricing increases in a decade during the fourth quarter.
"When people feel good about their own business, if they're serving more plates at their restaurants for example, then they are more willing to accept price increases," Slager added.
Waste Connections president Worthing Jackman mentioned similar trends during his company's conference call.
Jackman said that price increases ranged from about 3% to 5.5% — which is greater than the increase in the Consumer Price Index, one of the most closely-watched gauges of inflation.
But what about recycling? That side of the business was a headwind for the big waste companies last year, mainly because China banned imports on a large amount of recycled plastics and scrap paper.
Waste Management CEO James Fish acknowledged during a conference call Thursday that the company faced challenges in its recycling business in 2018 as it had to figure out new places to ship a lot of the recycled products it was collecting.
But Fish sees more opportunity this year as big companies realize they have to do more to make recycling viable. If they don't they face potential contamination fees from Waste Management.
Recycling is not a fad
"Sustainability has to be both environmentally and economically sustainable for it to really work," Fish said, adding that he's had recent conversations about this with Starbucks (SBUX) CEO Kevin Johnson about it.
Educating consumers will be key, too. Slager said one problem is that people are now becoming so eager to recycle that they may not be separating waste properly. That increases costs for his company.
So once consumers and businesses realize how to correctly set aside recyclables from regular trash, collecting all that paper, plastic and aluminum cans should become more efficient.
And the amount of recycling will only increase as more consumers shop online and get more packages with that familiar Amazon smile delivered to them. That will ultimately be a good thing for the waste companies.
"Recycling is on the rise, specifically cardboard boxes," Slager said. "E-commerce is not a fad. The on-demand economy is real. So we're adjusting the way we collect waste."
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