Despite a decelerating macro environment, the non-discretionary defensive characteristics of the waste management industry continue to exhibit impressive pricing leverage and steady free cash flow. Although Fed tightening will strengthen headwindsfor large waste generating sectors such as construction and manufacturing, the overall industry setup continues to lean favorably. Primary tailwinds include normalization of the education, commercial, and hospitality sectors, CPI-linked pricing leverage, highrecycling commodity prices, and a positive setup for M&A. However, while BMO’s economists are not currently forecasting a recession, if necessary, the industry maintains a proven cash flow preservation playbook that includes reducing overtime and discretionary expenses, optimizing equipment utilization, and postponing significant capital outlays.
Industry Update: Refuse and Recycling Spring 2022
