UBS analysts are expressing increased optimism towards waste-management stocks amidst a volatile market. Jon Windham and his team have upgraded shares of Waste Management (WM) and Republic Services (RSG) from Neutral to Buy in a recent report. They have also raised the price target for Waste Management to $190 from $170 and increased their call on Republic Services to $175 from $155.
Waste Management, which was previously identified as a top stock pick, is scheduled to release their third-quarter earnings after the market closes on Tuesday.
As of early Monday, Waste Management shares have shown a 0.3% increase, reaching $157.07, while Republic stock has ticked 0.4% higher to $145.65.
In addition, UBS has maintained Buy ratings on Waste Connections (WCN) and Casella Waste Systems (CWST).
The analysts at UBS believe that municipal solid waste stocks will be a popular choice for investors seeking to weather current market turbulence and the risk of an economic slowdown influenced by interest rates. They cite the fundamental stability of these businesses and the opportunities for mergers and acquisitions as supporting factors for their positive outlook.
UBS foresees Waste Management shifting its focus away from large-scale M&A deals due to its already prominent position in the sector. Instead, they expect the company to pursue smaller deals that expand their presence in renewable natural gas. Waste Management intends to build a facility that taps into biogas generated by a landfill, delivering it into a nearby commercial gas-distribution network.
The current valuation of Waste Management’s stock is lower than the target set by UBS analysts. They suggest that this indicates investors are not yet fully recognizing the resilient nature of Waste Management’s earnings.