Credit Suisse Downgrades Environmental Services Space

In a report published Thursday, Credit Suisse analyst Hamzah Mazari downgraded the Environmental Services space from Market Weight to Underweight. Mazari expects waste pricing levels to fall below three percent due to higher inflation and without specific structural changes. The analyst commented that “This is primarily due to what we refer to as the "rebirth phenomenon" combined with the industry fee structure (lack of price transparency unlike other consumer services like car rental).” Credit Suisse added that there has been little follow through of higher landfill pricing despite the fact that

and

own two-thirds of landfill capacity. Mazari remarked that private companies have also taken advantage of tax deductions to offset higher landfill prices. The analyst reminded investors “that the commercial line of business (highest collection margin segment) could take longer to inflect for major waste companies. Although the commercial business is not declining further, we suspect we need to see a greater amount of single family housing starts in new communities. The CS Homebuilding Team believes a lot of the initial upturn in US residential markets has been in communities that have already been built. This will likely make new retail business formation more of a 2016 event.” Credit Suisse prefers

and

over Waste Management and Republic Services to play “waste exposure.”