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Why Waste Management Stock Popped 5.5% This Morning

By Rich Smith - Mar 4, 2020 at 10:21AM

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Wall Street is this trash company's biggest fan.

What happened

Shares of Waste Management (WM 2.12%) enjoyed a brief pop above 5% this morning before subsiding to the more moderate 3.7% gain we see here at 11 a.m. EST.

Why the initial enthusiasm? This morning, and for the second time in a week, the nation's biggest trash collector won an endorsement on Wall Street.

Stock buyback spelled out on an LED tickertape board

Image source: Getty Images.

So what

Who are Waste Management's fans, and what are they saying?

A week ago, investment bank Oppenheimer cited "healthy near-term solid waste fundamentals" (says TheFly.com) as indicating that even if coronavirus damages the economy, Americans' propensity to generate trash should enable Waste Management to outperform other industrial "benchmarks." Oppenheimer upgraded Waste Management stock then, and today Swiss bank UBS is doing the same.

As StreetInsider.com reports, the Swiss bank is assigning Waste Management a $132 price target and upgrading the stock to a buy because the "10% share price decline since Feb. 19" creates "a buying opportunity for WM shares."

"WM is relatively well insulated from near-term economic volatility given the fee-for-service, contracted nature of the collection business," explains UBS. Additionally, as the stock gets cheaper, UBS expects Waste Management's, er...management to make opportunistic stock buybacks under its $1.3 billion share repurchase authorization.

Now what

Combined with a respectable 1.9% dividend yield, such repurchases will return additional cash to shareholders and concentrate future profits among fewer shares outstanding. Repurchases also, incidentally, tend to support stock prices -- helping to further insulate Waste Management shares from the effects of a broad stock sell-off in a stock market still scared to death of coronavirus.

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Waste Management, Inc. Stock Quote
Waste Management, Inc.
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