Covanta Signs Waste Management Deal - Analyst Blog

Covanta Holding Corporation CVA has announced partnership with nine Western Massachusetts municipalities to provide a package of sustainable waste management services. However, the company's share price edged down 1.0% to $17.52 per share on Apr 15.

Per the agreement, the nine municipalities will send approximately 25K tons of municipal solid waste to the Covanta Springfield Energy-from-Waste facility. This facility generates renewable electricity for 5,000 homes. The new partnership will likely start from July this year. If this partnership works well, the agreement may be extended after the completion of the initial three years.

The company also offers energy-from-waste disposal, recycling, bulky waste disposal, e-waste recycling and organics recycling/composting programs under its waste management services. In addition, the company provides disposal and renewable energy for the municipal as well as the commercial customers.

Covanta Holding, a leading waste technology management firm, is looking forward to the success of recycling and energy recovery process. Management expects to reduce greenhouse gases by approximately 260 million tons, which is equivalent to closing of 75 coal fired power plants or pulling 55 million cars off the road every year.  

In Dec 2013, Covanta's subsidiary Covanta SEMASS, L.P., entered into an agreement with the Town of Yarmouth, MA to provide a bundle of sustainable waste management services. Per the contract, the company will provide sustainable disposal of about 10,000 tons of Town's municipal solid waste at the Covanta SEMASS Energy-from-Waste facility.

Though the company delivered fourth-quarter 2013 results below the Zacks Consensus Estimate of 21 cents by 14.3%, it expects a stable revenue flow from a 20-year waste transport and disposal agreement with the New York City Department of Sanitation last year.

Currently Covanta Holding carries a Zacks Rank #3 (Hold). Other better-ranked stocks in this sector include Ormat Technologies Inc. ORA, Pattern Energy Group Inc. PEGI and Ceres, Inc. CERE. While Ormat Technologies holds a Zacks Rank #1 (Strong Buy), Pattern Energy and Ceres carry a Zacks Rank # 2 (Buy).