Waste Management says it's a dirty job, but someone has to do it

Posted Feb 29th 2008 5:29PM by Joseph Lazzaro
Filed under: Stocks to Buy

In the equities asset class, there are show horses -- high-profile, glamorous stocks that receive considerable news coverage; and work horses -- lesser-known stocks that don't receive a great of coverage, but get the job done, nonetheless. Put Waste Management decidedly in the latter category.

Waste Management, Inc. (NYSE: WMI) is the No. 1 waste disposal company in the United States. The company provides collection, transfer, recycling and resource recovery services to 21 million residential, industrial, municipal and commercial customers. WMI operates more than 430 collection operations and 277 landfills.

Analysts like WMI's strategy to sacrifice collection volume in favor of maintaining its pricing strategy and margins.

Further, analysts are also impressed by WMI's productivity improvements, lower workers' compensation costs, and the divestiture of underperforming assets. The Reuters FY 2008/FY 2009 EPS consensus estimates for WMI are $2.22 to $2.50.

The risks? Analysts have an eye on WMI's fuel costs, customer retention rate, and labor relations.

The First Call mean rating for WMI is: Buy [9 firms]. Mean 2008 target: $42.00 [high: $47, low: $39].

Stock Analysis: Waste Management is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from WMI's shares. Sell / Stop Loss if you were to purchase shares in this company: $17.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Tags: environment, garbage collection, recycling, refuse, Waste Management, WMI