As 2016 begins, the outlook for the industry looks fairly strong, with positive signs for pricing, volume– and even recycling. But energy volatility will continue to cause struggles.
Holding the Line on Price with Positive Volume
In last year’s outlook piece, Business Insights highlighted the falling price of oil and its various impacts on the solid waste industry, and obviously, the continued fall in oil remains a large factor. However, in the midst of a volatile stock market, in part driven by fears of a global economic and industrial slowdown, it is likely that the inherent late-cycle characteristics of the industry will come to the fore, with positive outlooks for price and volume.
First, with regard to price, solid waste companies are likely to forecast consistent levels in 2016, despite another modestly negative (perhaps 20-30 basis points) impact from continued low consumer price index (CPI)-related pricing, typical in municipal contracts. That would imply core pricing of around 4 percent for Waste Management (WM) and yield in the area of 2+ percent for Republic Services (RSG). Waste Connections (WCN) targeted 4 to 5 percent organic growth in its third-quarter conference call, likely indicating pricing around 2.5 percent. Progressive Waste (BIN) guided to 2016 pricing of 1.5 to 2 percent. As a combined company, organic growth was projected to remain around 4 percent, split evenly between price and volume.