Waste Management's Adjusted Earnings Fall Shy

Zacks

Waste Management, Inc. (WM) reported net income of $244 million or 52 cents per share in the second quarter of 2013, compared with $208 million, or 45 cents per share in the year-ago quarter. The increase in earnings was driven by collection and disposal yield.

Excluding costs, earnings per share (EPS) stood at 54 cents in the quarter versus 52 cents in the year-ago quarter. Adjusted earnings in the quarter missed the Zacks Consensus Estimate of 55 cents.

Quarter in Detail

Revenues for the second quarter 2013 were $3,526 million versus $3,459 million in the year-ago quarter. The quarterly sales were below the Zacks Consensus Estimate of $3,548 million.

Internal revenue growth from volumes was negative 0.6% for the quarter. Internal revenue growth from yield for collection and disposal operations was 2.1% for the reported quarter.

Average recycling commodity prices were down 12.5% year over year in the reported quarter.

Core price (including price increases and fees, other than the company’s fuel surcharge, net of rollbacks) was 3.6%, versus 2.5% in the year-ago quarter. Rollbacks were reduced by over 45% year over year, without a material increase in the company’s churn rate.

Revenues from the company’s Collection business increased 1.2% to $2.1 billion in the reported quarter. Landfill revenues escalated 5.9% to $716 million, Transfer revenues increased 4.2% to $345 million, Wheelabrator revenues increased 4.4% to $215 million and Recycling revenues decreased 0.8% to $366 million.

Operating expenses increased by $51 million to $2,311 million in the reported quarter, driven by higher operating costs from acquired operations and increased costs in the Company’s recycling operations.

SG&A expenses stood at $353 million, down 5.6% year over year in the reported quarter.

Financials

Cash and cash equivalents increased to $154 million as of Jun 30, 2013, versus $237 million in the year-ago period. Long-term debt, including current portion, stood at $9,770 million as of Jun 30, 2013 versus $9,826 million as of Jun 30, 2012.

Net cash provided by operating activities was $545 million and free cash flow was $347 million. Capital expenditures were $235 million in the reported quarter. For the reported quarter, Waste Management returned $171 million in dividends to its shareholders.

Outlook

Waste Management expects 2013 adjusted EPS to be in the range of $2.15 -$2.20. Free cash flow is projected between $1.1 billion and $1.2 billion.

Going forward, Waste Management expects some headwinds from its recycling operations. The company expects a full-year negative impact of 8 cents per share from its recycling operations. Going forward, the company is taking adequate measures to improve its price in the coming year and is also focused on controlling its costs.

However, Waste Management currently has a Zacks Rank #4 (Sell). Other stocks that look promising and are worth considering now are US Ecology, Inc. (ECOL) with a Zacks Rank #1 (Strong Buy),  Stericycle, Inc (SRCL) and Heartland Payment Systems, Inc (HPY), each carrying a Zacks Rank #2 (Buy).

Read the Full Research Report on WM

Read the Full Research Report on SRCL

Read the Full Research Report on ECOL

Read the Full Research Report on HPY

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