A month has gone by since the last earnings report for Waste Management (WM). Shares have added about 2.8% 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 Management 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.
Waste Management Beats Q1 Earnings, Revenue Estimates
Waste Management’s first-quarter 2019 earnings and revenues surpassed the Zacks Consensus Estimate.
Adjusted earnings per share of 94 cents beat the consensus mark and were higher than the year-ago quarter by 3 cents. Total revenues of $3.69 billion surpassed the consensus mark by $26 million and increased 5.3% year over year. The top line benefited from strong yield and volume growth in the company’s collection and disposal business, which contributed $190 million of incremental revenues. This was, however, partially offset by $16 million decline in recycling business revenues.
Internal revenue growth from yield for collection and disposal operations was 2.7% compared with 2.3% in the year-ago quarter.
Collection and disposal business internal revenue growth from volume was 3.6% or 4.1% on a workday adjusted basis in first-quarter 2019. Total company internal revenue growth from volume, which includes recycling business, was 3.4% or 4% on a workday adjusted basis.
Quarterly Numbers in Detail
The Collection segment recorded revenues of $2.45 billion, up 6.4% from the prior-year quarter’s figure. Landfill segment’s top line increased 7.3% year over year to $864 million. Total revenues in the Transfer segment were up 9.9% to $412 million. Recycling segment revenues decreased 6.7% to $291 million. Other businesses’ revenues totaled $431 million, up 0.9% year over year.
Operating EBITDA of $987 million increased 3.4% from the year-ago quarter’s level.
Waste Management exited first-quarter 2019 with cash and cash equivalents of $57 million compared with $61 million at the end of the prior quarter. Long-term debt was $9.32 billion compared with $9.59 billion at the end of the prior quarter.
The company generated $890 million of cash from operating activities and spent $471 million in capital expenditures. Free cash flow was $431 million compared with $423 million in the prior-year quarter.
The company paid dividends worth $223 million and repurchased shares worth $68 million in first-quarter 2019. It spent $394 million on acquisitions during the reported quarter.
Waste Management reaffirmed its full-year 2019 guidance. The company continues to expect adjusted EPS in the range of $4.28-$4.38. Adjusted operating EBITDA is expected in the range of $4.40-$4.45 billion. Free cash flow is expected between $2.025 and $2.075 billion. Adjusted effective tax rate is anticipated to be around 24%.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
At this time, Waste Management has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Waste Management has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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