Barron's article on BIN From Barron's August 16, 2011 The Right Way to Cash in On TrashEven in a time of economic turmoil, somebody's got to pick up the garbage.That's good news for shareholders of Progressive Waste Solutions (ticker: BIN), the third largest nonhazardous solid waste management company in North America after much larger Waste Management (WM) and Republic Services (RSG).But Progressive seems to be a better stock bet than these bigger names, thanks in part to its stronger earnings growth.The company gets about 56% of its revenue from residential, commercial and industrial customers in the U.S. and the rest from similar contracts in Canada. It generates plenty of cash relative to revenues, and what it doesn't use for acquisitions, it pays out to shareholders in the form of dividends and share buybacks.Stock Price: $20.1552-Week High: $25.4852-Week Low: $18.93Market Cap: $2.4 billionEst. 2012 EPS: $1.302012 P/E: 15 timesEst. Long-Term EPS Growth:* 16%Est. ('11/'12) EPS Growth: 16%Revenue (trailing 12 months): $ 1.8 billionDividend Yield: 2.6%CEO: Keith A. CarriganHeadquarters: Toronto, OntarioDespite its seemingly defensive qualities, Progressive shares fell 18% between the company's second-quarter earnings report on July 26 and Aug. 11, when they reached a 52-week low of $18.93. The drop was the result of lower-than-expected quarterly earnings, which the company blamed on poor weather, and broader fears that have plagued world markets for the past two weeks.Shares have since recovered some ground, rising 6%, but they are still far from their early July levels.Progressive shares trade at 17 times forward earnings and carry a 2.6% dividend yield, making them cheap compared to those of similarly-sized Waste Connections (WCN), which trade at 20 times forward earnings.Progressive's profits are expected to grow 19% in 2011 and 16% in 2012 as the company continues its track record of making strategic acquisitions that earn money from the outset."The underlying solid waste industry is a recession-resistant, necessary service with tremendous barriers to entry and produces a tremendous amount of free-cash flow," says Michael E. Hoffman, an analyst with Wunderlich Securities.Progressive was punished in the broad-market selloff because of fears that a second recession would cut into business, Hoffman says. Investors also targeted the company because about a third of its Canadian revenues, or about $300 million, is tied to the oil fields of Western Canada where it disposes of regular garbage, along with drilling waste. As oil prices dropped, so too did Progressive's shares.But Hoffman says the market wasn't taking into account the break-even point for drilling in oil sands, which he says is $50 to $60 a barrel when new capital investments are needed and $30 to $40 a barrel when capital is already in place.Oil never came anywhere near those levels, and it is now at about $87 a barrel.Of course, Progressive's earnings do tend to get hit when the industrial sector slows down. The company also has to overcome negative sentiment after its disappointing earnings report last quarter and the announcement on the same day by Chief Executive Keith A. Carrigan that he will retire at the end of this year. Carrigan's retirement was not entirely unexpected, but the timing may have come as a surprise.Still, analysts say Progressive COO Joseph D. Quarin should prove a capable successor, and economic jitters haven't done much to cloud the company's growth forecasts. Even though the company's construction waste business took a hit after the housing bust, prolonged weakness in that sector is already factored into estimates.Many of Progressive's contracts will withstand another economic downturn. Publicly-traded waste companies keep their customers for an average of 10 years, according to Hoffman."I think the selloff in line with the broader market is unwarranted, and I think it's a great buying opportunity," says Joshua Duitz, portfolio manager of the Alpine Global Infrastructure Fund, which holds Progressive shares.The company, which tends to focus on denser urban areas, has shown a great ability to make accretive acquisitions, Duitz says. Progressive can achieve maximum profitability by "tucking in" more customers along an existing route.In 2010, the company acquired Waste Services, which has collection, transfer, disposal and recycling services in the U.S. and Canada, in addition to being the second-largest vertically-integrated disposal company in Florida.Growth through acquisitions works well for Progressive because its size makes it less likely to run into anti-trust issues, unlike Waste Management or Republic, says Chris Murray, an analyst with PI Financial in Toronto. This allows the company to grow at a faster rate than competitors.Indeed, Progressive's unique combination of growth and defensiveness adds up to a rosy investment picture.Says Hoffman of Wunderlich: "If you want a cheap stock with growth and extraordinary free cash, that's BIN."