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What's in Store for Waste Management (WM) in Q2 Earnings?
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Waste Management, Inc. (WM - Free Report) is scheduled to report second-quarter 2016 results before the opening bell on Jul 27. In the last reported quarter, earnings comfortably beat the Zacks Consensus Estimate by 3 cents. Waste Management has a solid earnings surprise history, beating estimates on every occasion in the trailing four quarters for a positive average surprise of 4.75%.
Let’s see how things are shaping up for this announcement.
Key Factors to Consider
Waste Management is executing well on its initiatives to refocus on core business activities and instill price and cost discipline to achieve better margins. The company is working on improving customer retention by providing better service and higher value solutions. The company has also taken prudent steps to divest non-core operations and focus on high-growth areas that will generate higher cash flows and boost the top line.
In first-quarter 2016, Waste Management completed the acquisition of some business assets in Florida from regional waste management firms, Southern Waste Systems and Sun Recycling, which are likely to be accretive this season. The transaction was a strategic fit for the company, in sync with its existing operations and service offerings.
At the same time, the transaction enabled Waste Management to extend its geographic footprint and make a foray into the attractive South Florida market. A steady stream of accretive acquisitions is likely to drive earnings for the company.
In addition, Waste Management's successful cost-reduction initiatives have helped it in accomplishing remarkable gross margin expansion and EBITDA growth. The company is undertaking several steps to further boost its margins — one of which is by charging for recycling glass. Glass packaging is the third-largest market in the recycled material packaging segment and is expected to grow at a steady pace.
However, Waste Management’s recycling operations process certain recyclable materials, like fibers, aluminum and glass, all of which are subject to significant market price fluctuations. Decline in average recycling commodity prices and recycling volumes are headwinds, which can have a negative year-over-year impact on earnings.
The expiry of long-term power purchase agreements has made the company vulnerable to electric price volatility. Also, stringent government regulations are likely to restrict operations and increase expenses related to compliance.
The company expects volumes to be down due to lower national count as it strives for improved margin growth and pricing. The pricing environment remains challenging and highly competitive due to aggressive bidding by smaller competitors. The company needs to improve margins on the recycling side through adjustment of rebates to reflect lower pricing and also needs to improve the quality of inbound material to improve profitability.
Our proven model does not conclusively show that Waste Management is likely to beat earnings this quarter, as it lacks a key component. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently 0.00%.
Zacks Rank: Waste Management’s Zacks Rank #2 increases the predictive power of the ESP, but we need to have a positive ESP as well to be sure of an earnings beat. Conversely, the Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Bristol-Myers Squibb Company (BMY - Free Report) , earnings ESP of +1.49% and a Zacks Rank #1.
CalAtlantic Group, Inc. , earnings ESP of +9.21% and a Zacks Rank #1.
Innoviva, Inc. (INVA - Free Report) , earnings ESP of +25.00% and a Zacks Rank #1.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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What's in Store for Waste Management (WM) in Q2 Earnings?
Waste Management, Inc. (WM - Free Report) is scheduled to report second-quarter 2016 results before the opening bell on Jul 27. In the last reported quarter, earnings comfortably beat the Zacks Consensus Estimate by 3 cents. Waste Management has a solid earnings surprise history, beating estimates on every occasion in the trailing four quarters for a positive average surprise of 4.75%.
Let’s see how things are shaping up for this announcement.
Key Factors to Consider
Waste Management is executing well on its initiatives to refocus on core business activities and instill price and cost discipline to achieve better margins. The company is working on improving customer retention by providing better service and higher value solutions. The company has also taken prudent steps to divest non-core operations and focus on high-growth areas that will generate higher cash flows and boost the top line.
In first-quarter 2016, Waste Management completed the acquisition of some business assets in Florida from regional waste management firms, Southern Waste Systems and Sun Recycling, which are likely to be accretive this season. The transaction was a strategic fit for the company, in sync with its existing operations and service offerings.
At the same time, the transaction enabled Waste Management to extend its geographic footprint and make a foray into the attractive South Florida market. A steady stream of accretive acquisitions is likely to drive earnings for the company.
In addition, Waste Management's successful cost-reduction initiatives have helped it in accomplishing remarkable gross margin expansion and EBITDA growth. The company is undertaking several steps to further boost its margins — one of which is by charging for recycling glass. Glass packaging is the third-largest market in the recycled material packaging segment and is expected to grow at a steady pace.
However, Waste Management’s recycling operations process certain recyclable materials, like fibers, aluminum and glass, all of which are subject to significant market price fluctuations. Decline in average recycling commodity prices and recycling volumes are headwinds, which can have a negative year-over-year impact on earnings.
The expiry of long-term power purchase agreements has made the company vulnerable to electric price volatility. Also, stringent government regulations are likely to restrict operations and increase expenses related to compliance.
The company expects volumes to be down due to lower national count as it strives for improved margin growth and pricing. The pricing environment remains challenging and highly competitive due to aggressive bidding by smaller competitors. The company needs to improve margins on the recycling side through adjustment of rebates to reflect lower pricing and also needs to improve the quality of inbound material to improve profitability.
WASTE MGMT-NEW Price and EPS Surprise
WASTE MGMT-NEW Price and EPS Surprise | WASTE MGMT-NEW Quote
Earnings Whispers
Our proven model does not conclusively show that Waste Management is likely to beat earnings this quarter, as it lacks a key component. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently 0.00%.
Zacks Rank: Waste Management’s Zacks Rank #2 increases the predictive power of the ESP, but we need to have a positive ESP as well to be sure of an earnings beat. Conversely, the Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Bristol-Myers Squibb Company (BMY - Free Report) , earnings ESP of +1.49% and a Zacks Rank #1.
CalAtlantic Group, Inc. , earnings ESP of +9.21% and a Zacks Rank #1.
Innoviva, Inc. (INVA - Free Report) , earnings ESP of +25.00% and a Zacks Rank #1.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>