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Why Is Covanta (CVA) Down 5% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Covanta (CVA). Shares have lost about 5% in that time frame, outperforming the S&P 500.

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

Covanta Holding Q2 Earnings Lag, Revenues Top Estimates

Covanta Holding incurred second-quarter 2019 loss of 16 cents per share, which was wider than the Zacks Consensus Estimate of a loss of 9 cents. The company reported a loss of 24 cents in the year-ago quarter.

Revenues

In the quarter under review, the company's revenues amounted to $467 million, which beat the Zacks Consensus Estimate of $463 million by 0.9%. Also, the top line increased 2.8% on a year-over-year basis. The upside was driven by higher Waste and service revenues.

Operational Update

Covanta Holding’s total adjusted operating expenses were $457 million, down 3.2% year over year.

Interest expenses amounted to $36 million, flat year over year.

Financial Condition

The company had cash and cash equivalents of $102 million as of Jun 30, 2019 compared with $58 million as of Dec 31, 2018.

Long-term and project debt amounted to $2,446 million as of Jun 30 compared with $2,327 million as of Dec 31, 2018.

Net cash provided by operating activities in the first six months of 2019 was $87 million, up from $63 million in the year-ago period.

Guidance

Covanta Holding expects 2019 adjusted EBITDA in the range of $420-$445 million and Free Cash Flow in the band of $120-$145 million.


 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -24.24% due to these changes.

VGM Scores

At this time, Covanta has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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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