As the Q1 earnings season wraps, let’s dig into this quarter’s best and worst performers in the environmental and facilities services industry, including Aris Water (NYSE: ARIS) and its peers.
Many environmental and facility services are non-discretionary (sports stadiums need to be cleaned after events), recurring, and performed through longer-term contracts. This makes for more predictable and stickier revenue streams. Additionally, there has been an increasing focus on emissions and water conservation over the last decade, driving innovation in the sector and demand for new services. Despite these tailwinds, environmental and facility services companies are still at the whim of economic cycles. Interest rates, for example, can greatly impact commercial construction projects that drive incremental demand for these services.
The 13 environmental and facilities services stocks we track reported a strong Q1. As a group, revenues were in line with analysts’ consensus estimates while next quarter’s revenue guidance was 1.3% below.
Thankfully, share prices of the companies have been resilient as they are up 6.8% on average since the latest earnings results.
Best Q1: Aris Water (NYSE: ARIS)
Primarily serving the oil and gas industry, Aris Water (NYSE: ARIS) is a provider of water handling and recycling solutions.
Aris Water reported revenues of $120.5 million, up 16.5% year on year. This print exceeded analysts’ expectations by 6.5%. Overall, it was a stunning quarter for the company with a solid beat of analysts’ sales volume and EBITDA estimates.
“Aris continued its positive momentum with an excellent first quarter. We received record-breaking volumes from our long-term contracted customers in both Produced Water and Water Solutions and surpassed the top end of our Adjusted EBITDA guidance. We maintained strong margins, achieving an Adjusted Operating Margin of $0.44 per barrel in the quarter. Margin strength was driven by continued operational efficiency, as well as an approximately $2 million benefit from the timing of planned maintenance activity which will now be incurred in the second quarter,” said Amanda Brock, President and CEO of Aris.
Aris Water achieved the biggest analyst estimates beat of the whole group. Investor expectations, however, were likely higher than Wall Street’s published projections, leaving some wishing for even better results (analysts’ consensus estimates are those published by big banks and advisory firms, not the investors who make buy and sell decisions). The stock is down 7% since reporting and currently trades at $23.67.
Montrose (NYSE: MEG)
Founded to protect a tree-lined two-lane road, Montrose (NYSE: MEG) provides air quality monitoring, environmental laboratory testing, compliance, and environmental consulting services.
Montrose reported revenues of $177.8 million, up 14.5% year on year, outperforming analysts’ expectations by 6%. The business had a stunning quarter with a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ EPS estimates.
The market seems happy with the results as the stock is up 31.4% since reporting. It currently trades at $19.70.
Is now the time to buy Montrose? Access our full analysis of the earnings results here, it’s free.
Slowest Q1: Perma-Fix (NASDAQ: PESI)
Tackling hazardous waste challenges since 1990, Perma-Fix (NASDAQ: PESI) provides environmental waste treatment services.
Perma-Fix reported revenues of $13.92 million, up 2.2% year on year, falling short of analysts’ expectations by 9%. It was a disappointing quarter as it posted a significant miss of analysts’ EBITDA and EPS estimates.
Perma-Fix delivered the weakest performance against analyst estimates in the group. Interestingly, the stock is up 15.8% since the results and currently trades at $10.25.
Read our full analysis of Perma-Fix’s results here.
Rollins (NYSE: ROL)
Operating under multiple brands like Orkin and HomeTeam Pest Defense, Rollins (NYSE: ROL) provides pest and wildlife control services to residential and commercial customers.
Rollins reported revenues of $822.5 million, up 9.9% year on year. This print met analysts’ expectations. Zooming out, it was a mixed quarter as it also logged a narrow beat of analysts’ EPS estimates but a slight miss of analysts’ EBITDA estimates.
The stock is up 4.4% since reporting and currently trades at $57.31.
Read our full, actionable report on Rollins here, it’s free.
Republic Services (NYSE: RSG)
Processing several million tons of recyclables annually, Republic (NYSE: RSG) provides waste management services for residences, companies, and municipalities.
Republic Services reported revenues of $4.01 billion, up 3.8% year on year. This result lagged analysts' expectations by 0.9%. Taking a step back, it was a mixed quarter as it also recorded an impressive beat of analysts’ adjusted operating income estimates but sales volume in line with analysts’ estimates.
The stock is up 4.6% since reporting and currently trades at $251.33.
Read our full, actionable report on Republic Services here, it’s free.
Market Update
Thanks to the Fed’s rate hikes in 2022 and 2023, inflation has been on a steady path downward, easing back toward that 2% sweet spot. Fortunately (miraculously to some), all this tightening didn’t send the economy tumbling into a recession, so here we are, cautiously celebrating a soft landing. The cherry on top? Recent rate cuts (half a point in September 2024, a quarter in November) have propped up markets, especially after Trump’s November win lit a fire under major indices and sent them to all-time highs. However, there’s still plenty to ponder — tariffs, corporate tax cuts, and what 2025 might hold for the economy.
Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Growth Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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