Waste Management, Inc’s (WM) net income of $291 million or 62 cents per share in the third quarter of 2013 improved from $214 million or 46 cents per share in the year-ago quarter. The increase in earnings was driven by increasing internal revenue growth from yield and controlling costs.
Excluding costs, earnings per share (EPS) stood at 65 cents in the quarter versus 61 cents in the year-ago quarter. Adjusted earnings in the quarter beat the Zacks Consensus Estimate of 62 cents.
Quarter in Detail
Revenues for the third quarter of 2013 were $3,621 million versus $3,461 billion in the year-ago quarter. The quarterly sales were above the Zacks Consensus Estimate of $3,596 million. The increase in earnings was driven by acquisitions and internal revenue growth from yield.
Internal revenue growth from volumes was a negative 0.6% in the quarter. Internal revenue growth from yield for collection and disposal operations was 2.3% in the reported quarter.
Core price (including price increases and fees, other than the company’s fuel surcharge, net of rollbacks) was 3.9% versus 2.3% in the year-ago quarter.
Revenues from the company’s Collection business increased 3.5% to $2.1 billion in the reported quarter. Landfill revenues escalated 5.1% to $741 million, Transfer revenues increased 6.0% to $352 million, Wheelabrator revenues decreased 1.8% to $214 million and Recycling revenues increased 16.1% to $367 million.
Operating expenses increased by $96 million to $2,325 million in the reported quarter, driven by higher cost from acquired operations of Greenstar, increased recycling costs, and costs at the company’s waste-to-energy facilities.
SG&A expenses stood at $349 million, up 4.2% year over year in the reported quarter.
Cash and cash equivalents stood at $157 million as of Sep 30, 2013, versus $398 million in the year-ago period. Long-term debt, including current portion, stood at $10,059 million as of Sep 30, 2013 versus $9,992 million as of Sep 30, 2012.
Net cash provided by operating activities was $736 million and free cash flow was $452 million. Capital expenditures were $323 million in the reported quarter. For the reported quarter, Waste Management returned $171 million in dividends to its shareholders.
Waste Management expects 2013 adjusted EPS to be in the range of $2.15-$2.20. Free cash flow is projected between $1.2 billion and $1.3 billion. Going forward, Waste Management expects some headwinds from its recycling operations. The company expects a full-year negative impact of 3 cents per share in the fourth quarter and 13 cents per share from its recycling operations in fiscal 2013. Going forward, the company is taking adequate measures in controlling its costs.
However, Waste Management currently has a Zacks Rank #4 (Sell). Other stocks that look promising and are worth considering now are Republic Services, Inc (RSG), with a Zacks Rank #1 (Strong Buy), and Clean Harbors, Inc (CLH) and Global Payments Inc. (GPN), each carrying a Zacks Rank #2 (Buy).