Mixed Bag for Waste Management

Zacks

Waste Management Inc. (WM) reported a net income of $224 million or 48 cents per share in the fourth quarter of 2012 compared with $266 million, 58 cents per share in the year-ago quarter. Adjusted earnings per share (EPS) stood at 57 cents in the quarter versus 63 cents in the year-ago quarter.

Adjusted earnings in the quarter missed the Zacks Consensus Estimate of 61 cents. The year-over-year fall was due to a decline in recycling and electricity commodity prices in the quarter.

For fiscal 2012, EPS was $1.76 versus $2.04 in the year-ago period. For fiscal 2012, adjusted EPS was $2.08 compared with $2.14 in the year-ago period.  Adjusted EPS for the year was in line with the Zacks Consensus Estimate

Quarter in Detail
 
Revenues increased 0.8% to $3,434 million in fourth quarter 2012. The quarterly sales were ahead of the Zacks Consensus Estimate of $3,396 million.  For full year 2012, revenues increased 2.0% to $13.65 billion.

Internal revenue growth from volumes inched up 0.4% for the quarter. Internal revenue growth from yield for collection and disposal operations was 0.9% for the reported quarter.
 
Revenues from the company’s Collection business dipped 0.6% to $2.1 billion in the reported quarter. Landfill revenues escalated 2.6% to $689 million, Transfer revenues increased 5.9% to $335 million, Wheelabrator revenues inched up 0.9% to $215 million and Recycling revenues declined 6.9% to $330 million.
 
Operating expenses increased by $79 million from the prior-year quarter to $2,224 million in the reported quarter.

Financials
 
Cash and cash equivalents decreased to $194 million as of Dec 31, 2012 from $258 million in the prior-year period. Long-term debt stood at $9173 million as of Dec 31, 2012 versus $9125 million in the year-ago period. The debt-to-capitalization ratio stood at 59.8% as Dec 31, 2012 compared to 60.4% in the year ago period.
    
In the reported quarter, net cash provided by operating activities was $577 million and free cash flow was $215 million. For full year, Waste Management returned $658 million in dividends to its shareholders.

Outlook
 
Waste Management now expects 2013 adjusted EPS in the range of $2.15 -$2.20. Internal revenue growth from yield on the collection and disposal business is expected to be in the range of 1.0% to 1.5%. Internal revenue growth from volume is expected to be between 0.5% and 1.0%

Free cash flow is projected between $1.1 billion and $1.2 billion (excluding divestiture benefit).

However, the company operates in an intensely competitive landscape that includes big players such as Clean Harbors, Inc (CLH) and Stericycle, Inc (SRCL).

Waste Management currently has a Zacks Rank #2 (Buy). One of its competitors, Tower Watson & Co (TW) also carries a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on WM

Read the Full Research Report on SRCL

Read the Full Research Report on TW

Read the Full Research Report on CLH

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