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Why Is Waste Connections (WCN) Up 4.1% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Waste Connections (WCN). Shares have added about 4.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Waste Connections due for a pullback? 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 catalysts.

Waste Connections Q1 Earnings & Revenues Top Estimates

Waste Connections reported impressive first-quarter 2019 results, with earnings and revenues beating the Zacks Consensus Estimate.

Adjusted EPS of 62 cents surpassed the consensus mark by 2 cents and improved 10.7% year over year. Quarterly revenues came in at $1.24 billion, which outpaced the consensus mark by $2 million and increased 9.2% on a year-over-year basis.

Consistent strength in solid waste pricing growth, E&P waste activity and contributions from acquisitions aided the company’s results, offsetting recycling and weather-related headwinds.

Revenues in Details

Reported revenues in the Solid Waste Collection segment increased 10.1% year over year to $889.2 million. The segment contributed 71% to total revenues.

Reported revenues in the Solid Waste Disposal and Transfer segment rose 8.8% year over year to $240.7 million. It contributed 19% to total revenues.

Reported revenues in the E&P Waste Treatment, Recovery and Disposal segment improved 20.1% year over year to $63.97 million. It contributed 5% to total revenues.

Reported revenues in the Solid Waste Recycling segment grew 13.5% year over year to $63.1 million. The unit contributed 5% to total revenues.

Reported revenues in the Intermodal and Other segment fell 3.4% year over year to $32.3 million. It contributed 3% to total revenues.

Operating Results

Adjusted EBITDA in the first quarter was $385.7 million compared with $356.9 million in the year-ago quarter. Adjusted EBITDA margin was 31% of total revenues compared with 31.3% in the prior-year quarter.

Operating income totaled $184.9 million compared with $188.7 million a year ago. Operating income, as a percentage of revenues, was 14.9% compared with 16.6% in the year-ago quarter.

Balance Sheet and Cash Flow

Waste Connections exited first-quarter 2019 with cash and cash equivalent balance of $499.5 million compared with $319.3 million in the fourth quarter. Long-term debt at the end of the quarter was $4.2 billion, flat with the prior-quarter figure.

The company generated $363.7 million of cash from operating activities in the reported quarter and spent $114.2 million on capex. Adjusted free cash flow was $246.3 million compared with $220.2 million in the last reported quarter.

Waste Connections paid dividend of $42.1 million in the quarter.

Q2 View

Waste Connections expects revenues to be around $1.36 billion. Adjusted EBITDA is estimated to be around $434 million (roughly 31.9% of revenues). Depreciation and amortization expenses are expected to be around 13.7% of revenues.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Waste Connections has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 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 upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Waste Connections has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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