Your Money, Your Retirement, and the 2016 Presidential Election - What changes will you need to make to your portfolio should Hillary Clinton become president? What happens to your investments should Donald Trump become president? Join us on Sept. 12 as our panel of the world's top financial experts provide trusted information on the investment risks and opportunities that arise with the upcoming presidential election in November. [ Learn more about the event and RSVP.]
"[Low oil prices] are good news for our fleet, but with recycling low energy prices, both oil and electricity is what drives fiber and plastics recycling. So when you have those low oil prices, you can't sell the materials for as much on the back-end, which means it becomes less profitable. Which means you dis-invest in it," he explained.
About five years ago, recycling was 12% of Waste Management's business and it was investing $300 million to $400 million in it, Steiner said. Now, it's only about 8% of the company's business, with investments of under $20 million a year, Steiner said.
For recycling to be profitable again, "you either need to draw down the processing cost or you need to drive up the price on the back-end," he claimed. "Hopefully both."
Recycling tends to have a three-to-four-year V-shaped curve, where it goes down quick and pops back up quick, Steiner said. And right now, we're in the fourth year of "basically a recycling recession," he said.
"And what I like to say is, 'If we're dis-investing in recycling, think what the other folks are doing that don't have other parts of business to fall back on," Steiner said.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
TheStreet Ratings team rates Waste Management as a Buy with a ratings score of A. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that the team rates.
You can view the full analysis from the report here: WMWM data by YCharts