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Price drops for corrugated cardboard and old newspaper have hurt earnings for waste-haulers in the 4th qtr of 1995. They will benefit in 1996 from EPA waste-volume and landfill regulations, as well as from a growing economy, however. Demand has increased for water purification due to ultrapure water requirements in the food and other industries, but remedial services may not do well. Investors must select timely leaders among these stocks.

Stocks of the environmental industry are rising due to good revenues and earnings since 1994. Acquisitions, restructuring, and price relief are also benefitting results. Higher recycled paper prices are aiding the recycling sector, new operational requirements are bolstering landfills, and water treatment is in demand. Investors need to select timely stocks that have gained operating efficiency and technological leadership.

Earnings are recovering for the environmental industry in 1995, especially for landfill operations and waste hauling companies. The increase in volume will only be moderate, however, for the next three to five years and earnings increases will be slow. The hazardous waste sector is mixed, but there is greater demand for water purification. Investors will find some attractive stocks for the next three to five years.

Environmental service stocks have been depressed since 1990 due to weak earnings and prices. Mergers, corporate restructuring, and stronger demand has led to better financial performance since 1994, especially in water treatment and hazardous waste stocks. Improved timeliness for these companies, such as Ionics and OHM, should help their values increase for the next three to five years.