Standard & Poor’s predicts continued strength in the waste management sector despite recent problems in the credit markets and the economy. Strong cash flows in the sector and the somewhat recession-resistant nature of the business makes it a refuge in the storm.
The largest waste collectors are expected to continue to sacrifice market share in favor of higher pricing and strategic asset utilization towards more profitable business and markets. Rising prices will outpace declining construction and demolition volumes from the soft housing market.
Waste Management Inc.’s recent capital allocation plan for 2008 evidences the industry trend to control costs by investing in vehicle maintenance and fleet upgrades while also emphasizing worker safety programs. Within this strategy, the companies will continue to invest excess cash in debt reduction, share buybacks, dividends, “tuck-in” acquisitions and asset swaps. Strategic market positioning will aid efforts to improve efficiencies through higher route densities and internalization of more waste collected into company owned landfills.
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