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Covanta (CVA) Up 0.2% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Covanta (CVA). Shares have added about 0.2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Covanta due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Covanta Holding Posts Narrower-Than-Expected Loss in Q2

Covanta Holding reported a loss of 10 cents per share for second-quarter 2020, narrower than the Zacks Consensus Estimate of a loss of 19 cents. The figure also compares favorably with the loss of 16 cents a year ago.

Revenues

In the quarter under review, Covanta Holding’s revenues amounted to $454 million. The top line beat the Zacks Consensus Estimate of $450 million by 0.9%. However, the same dipped 2.8% on a year-over-year basis, primarily due to lower water and service revenues.

Highlights of the Release

At the end of the second quarter, the company’s adjusted EBITDA came in at $96 million, up 2.1% from the year-ago quarter's $94 million.

In the reported quarter, Covanta Holding’s total operating expenses summed $436 million, down 4.6% year over year on lower plant operating expenses.

Interest expenses were $34 million, down 5.6% from $36 million in the prior-year quarter.

Financial Condition

Covanta Holding had cash and cash equivalents of $39 million as of Jun 30, 2020 compared with $37 million as of Dec 31, 2019.

Long-term debt was $2,387 million as of Jun 30, 2020 compared with $2,366 million as of Dec 31, 2019.

Net cash provided by operating activities at the end of the first half of 2020 was $155 million, higher than $87 million at the end of the first half of 2019.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -230% due to these changes.

VGM Scores

Currently, Covanta has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Covanta has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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