Casella Waste Systems, Inc. (NASDAQ:CWST) experienced a decline in stock value during the third quarter of 2025, despite reporting stronger-than-expected revenues. According to the latest investor letter from TimesSquare Capital Management, which oversees the U.S. Small Cap Growth Strategy, the company’s share price fell by 5.03% over the past year, closing at $100.12 on January 5, 2026. The company, which specializes in solid waste services, reported revenues of $485.4 million for the quarter, marking a significant increase of 17.9% year-over-year.
Despite the revenue growth, Casella’s earnings were adversely affected by a slower-than-anticipated integration of newly acquired territories in the Mid-Atlantic region and challenges associated with implementing a new enterprise resource planning (ERP) system. TimesSquare Capital noted that these issues are likely transitory. The firm stated in its investor letter, “We see both issues as transitory, knowing that Casella in the past quickly improved margins of acquisitions and the ERP system should facilitate that, so we added to our position.”
Investment Sentiment and Hedge Fund Interest
While Casella Waste Systems is not among the top 30 most popular stocks among hedge funds, interest in the company has seen a modest increase. At the end of the third quarter, 26 hedge fund portfolios held shares of Casella, up from 24 in the previous quarter. This indicates a growing confidence among some institutional investors, despite the challenges the company is currently facing.
The performance of Casella Waste Systems stands in contrast to broader market trends, as the Russell 2000 Growth Index achieved a 12.19% return during the same quarter. TimesSquare Capital’s U.S. Small Cap Growth Strategy reported a return of 2.26% (gross) and 2.01% (net). The fund highlighted that all asset classes, except fixed income outside the U.S., posted positive returns during this period.
The investor letter also pointed out that while some AI stocks are perceived to offer greater potential for returns in a shorter timeframe, Casella Waste Systems still holds promise. The firm expressed a belief in the company’s ability to overcome current operational hurdles and improve margins, aligning with its historical performance.
Future Outlook
As Casella Waste Systems navigates these challenges, its ability to effectively integrate new territories and streamline operations will be crucial for future growth. The company has a history of quickly adapting to changes and improving efficiency, which gives some analysts reason to remain optimistic.
With a market capitalization of $6.357 billion, the company’s position in the market remains strong, but it will need to address current setbacks to regain investor confidence fully. As the company moves forward, stakeholders will be closely monitoring its operational strategies and financial performance in the coming quarters.
In conclusion, while Casella Waste Systems faces short-term challenges, its revenue growth and potential for operational improvement could set the stage for a more favorable outlook in the future.