Covanta Shares Popped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of renewable energy company Covanta (NYS: CVA) are popping by 10% following its better-than-expected fourth-quarter results.

So what: With no shortage of waste, Covanta, which specializes in transforming waste into renewable forms of energy, reported a profit of $0.26 (excluding one-time items) on sales of $430 million. Wall Street had been looking for a profit of $0.23 on sales of $418 million. Even better, Covanta's 2012 EPS forecast ticked in slightly higher than the median consensus estimate ($0.55 to $0.65 versus $0.59).

Now what: It's a dirty business, but someone has to do it -- and Covanta is doing it well. Service fee revenue, as well as recycled metal and waste volume were up significantly during the fourth quarter. Covanta isn't going to surprise you with triple-digit growth, but this is another company whose business model is founded on sustainable growth and a seemingly endless pile of waste. I wouldn't consider the stock cheap at these levels, but it definitely has a good shot to be a winner over the long term.

Craving more input? Start by adding Covanta to your free and personalized watchlist so you can keep up on the latest news with the company.

At the time this article was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of Covanta. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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