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A month has gone by since the last earnings report for Waste Management (WM). Shares have added about 4.3% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Waste Management Surpasses Q3 Earnings & Revenue Estimates
Waste Management reported better-than-expected third-quarter 2020 results.
Adjusted earnings (excluding 17 cents from non-recurring items) per share of $1.09 beat the Zacks Consensus Estimate by 5.8% but fell 8.4% year over year. Total revenues of $3.86 billion beat the consensus estimate by 3.5% but declined 2.7% year over year.
In the reported quarter, revenues declined $99 million in the company’s collection and disposal business due to $192 million worth of volume declines, which were partially offset by $93 million of yield growth.
Quarterly Numbers in Detail
The Collection segment recorded revenues of $2.5 billion, down 4.2% from the prior-year quarter’s figure. Landfill segment’s top line declined 4.7% year over year to $946 million. Total revenues in the Transfer segment were up 2.3% to $482 million. Recycling segment revenues improved 18.4% to $290 million. Other businesses’ revenues totaled $458 million, down 2.3% year over year.
Adjusted operating EBITDA of $1.14 billion declined marginally from the year-ago quarter’s level. Adjusted operating EBITDA margin rose to 29.5% from 28.8% in the prior-year quarter.
Operating income came in at $680 million compared with $734 million in the year-ago quarter. Operating income margin declined to 17.6% from 18.5% in the year-ago quarter.
Waste Management exited third-quarter 2020 with cash and cash equivalents of $703 million compared with $2.6 billion at the end of the prior quarter. Long-term debt (minus current portion) was $10.25 billion compared with $9.59 billion at the end of the prior quarter.
The company generated $1.03 billion of cash from operating activities and capital expenditures were $343 million. Free cash flow was $691 million. The company paid out dividends worth $230 million.
Waste Management expects adjusted operating EBITDA margin is anticipated in the range of 28-28.5% (unchanged from previous guidance). Free cash flow is estimated in excess of $2 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
At this time, Waste Management has a nice Growth Score of B, a grade with the same score on the momentum front. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, 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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