US Business Services: Mid-year update and outlook for H2:26

Research evidence excerpt

US Business Services: Mid-year update and outlook for H2:26

6 July 2026

US Business Services

After a strong first half for Industrials broadly, traditional US Business Services Connor Cerniglia, CFA

+1 917 344 8472 stocks have lagged: our Waste coverage underperformed the S&P 500 by -8%, Cintas

connor.cerniglia@bernsteinsg.com -13%, and Rollins the worst lagging -37%. Versus the Industrial sector underperformance

is even worse. This is not a story of deteriorating fundamentals: EBITDA revisions are flat

Bridget Alkin year-to-date for our Waste coverage and Cintas, albeit fundamentals for Rollins have come

+1 917 344 8359

bridget.alkin@bernsteinsg.com under concern. Rather, the market has rotated into higher-beta, pro-cyclical names—data

center beneficiaries, PMI-sensitive industrials, etc.—leaving Waste and uniforms as relative

laggards. There is some justification to this—for businesses with stable revisions they ought

to underperform those with more positive ones.

We believe the Waste industry outlook has improved modestly since January. Fed

2026 CPI expectations have risen to 3.5% from 2.6%, and given that many contracts price

on a 12-month average CPI with a 6-month lag, FY2027 pricing estimates likely need

to move higher. Recycled commodity prices are up year-to-date across OCC and

plastics, D3 RIN prices are up 23% YoY, and with PMI above 50 for five consecutive

months, industrial volumes offer near-term upside compared to when PMI was 47.9 at

the start of the year. The clearest risk is Residential, where volumes have stayed negative

longer than management teams anticipated—Republic Services’s CEO described industry

competition as, “people willing to work for very, very low returns” on the last earnings call