Why Is Waste Connections (WCN) Down 2.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Waste Connections (WCN). Shares have lost about 2.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Waste Connections 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 catalysts.
Waste Connections Beats on Q2 Earnings
Waste Connections reported solid second-quarter 2023 results, wherein both earnings and revenues surpassed the respective Zacks Consensus Estimates.
Adjusted earnings (excluding 21 cents from non-recurring items) of $1.02 per share beat the Zacks Consensus Estimate by 1% and increased 2% year over year. Revenues of $2.02 billion topped the consensus estimate by 0.6% and rose 11.3% year over year.
Acquisitions contributed $141.36 million to revenues in the reported quarter.
Revenues by Segment
The Solid Waste Collection segment’s revenues increased 14.7% year over year to $1.48 billion and beat our estimate by 1.4%
The Solid Waste Disposal and Transfer segment’s revenues increased 12.3% from the year-ago quarter’s level to $407.69 million, surpassing our estimate by 4.7%.
The Solid Waste Recycling segment’s revenues plunged 42.3% year over year to $37.33 million. The figure was lower than our estimated $44.9 million.
The Intermodal and Other segment’s revenues decreased 11.2% to $39.3 million in a years’ time. The E&P Waste Treatment, Recovery and Disposal segment’s revenues soared 9.9% from the year-ago quarter’s level to $55.41 million, marginally beating our estimated $54.7 million.
Operating Results
Adjusted EBITDA in the reported quarter was $622.89 million, up 11% from the year-ago quarter’s level. Adjusted EBITDA margin came in at 31.1%, compared with 31.2% in the year-ago quarter.
Operating income totaled $344.13 million, up 4.4% from the prior-year quarter’s level.
Balance Sheet and Cash Flow
Waste Connections exited second-quarter 2023 with cash and cash equivalents of $91.71 million, compared with $133.9 million at the end of the prior quarter. Long-term debt was $6.89 billion, compared with $6.92 billion at the end of the December quarter.
WCN generated $574.35 million in cash from operating activities in the reported quarter. Adjusted free cash flow was $355.97 million. Capital expenditures totaled $218.36 million.
Currently, Waste Connections carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Outlook
For the full year 2023, revenues are estimated to be $8.025 billion, revised from the prior guidance of $8.05 billion.
Net income is expected to be $931 million, down from the prior expectation of $961 million. Adjusted EBITDA is estimated to be $2.525 billion.
Capital expenditures are projected to be approximately $950 million, raised from the previous expectation of $925 million.
Net cash provided by operating activities is anticipated to be $2.141 billion, up from the previously expected $2.12 billion. Adjusted free cash flow is estimated to be $1.225 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Waste Connections has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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 downward 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.
Performance of an Industry Player
Waste Connections belongs to the Zacks Waste Removal Services industry. Another stock from the same industry, Stericycle (SRCL), has gained 5.1% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Stericycle reported revenues of $669.5 million in the last reported quarter, representing a year-over-year change of -1.5%. EPS of $0.43 for the same period compares with $0.48 a year ago.
Stericycle is expected to post earnings of $0.43 per share for the current quarter, representing a year-over-year change of -33.9%. Over the last 30 days, the Zacks Consensus Estimate has changed -7.3%.
Stericycle has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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Waste Connections, Inc. (WCN) : Free Stock Analysis Report
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