Bear of the Day: Progressive Waste Solutions (BIN)

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February 27, 2013 |
BIN

Progressive Waste Solutions Ltd. (BIN - Snapshot Report) reported a fourth quarter earnings miss, and management provided weak guidance for 2013. This prompted analysts to revise their estimates lower for both 2013 and 2014, sending the stock to a Zacks Rank #5 (Strong Sell) stock. Although shares have sold off a bit after the report, valuations still do not look cheap.

Company Description

Progressive Waste Solutions is a full-service waste management company that provides non-hazardous solid waste collection, recycling and disposal services to commercial, industrial, municipal and residential customers in 13 U.S. states and the District of Columbia and six Canadian provinces. It is headquartered in Vaughan, Canada and has a market cap of $2.4 billion.

Earnings Miss, Weak Guidance

Progressive Waste Solutions reported its Q4 results on February 14. Earnings per share came in at 24 cents, missing the Zacks Consensus Estimate by 8%. This marked the company's third earnings miss in the last four quarters. EPS was also 25% lower than in the same quarter in 2011. Revenues did rise 8%, but this was driven mostly by acquisitions and favorable foreign currency effects. Organic revenues were up just 0.6%. Meanwhile, adjusted operating income fell 19% year-over-year.

Management also provided weak guidance for 2013, prompting virtually every analyst to revise his estimates lower for both 2013 and 2014. This sent the stock to a Zacks Rank #5 (Strong Sell). The 2013 Zacks Consensus Estimate has fallen 16% since the Q4 report to $0.99, while the 2014 consensus is down 8% to $1.23. The Zacks Industry Rank isn't very bullish either. The 'Pollution Control' industry ranks in the bottom quartile of all the industries that we rank.

Premium Valuation

Shares of Progressive Waste are down about 8% since the Q4 earnings release, but the stock still looks a bit pricey. BIN trades at 20x 12-month forward earnings, ahead of the industry median of 18x and the stock's historical median of 19x. Progressive Waste also carries a long-term 'Underperform' Zacks Recommendation.

The Bottom Line

With negative earnings momentum, sluggish organic top-line growth and premium valuation, don't expect strong outperformance from this stock anytime soon.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

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