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Waste Connections (WCN) Hits 52-Week High on Core Focus
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Shares of waste management services provider Waste Connections Inc. (WCN - Free Report) scaled a new 52-week high of $78.38 on Aug 9, before closing the trading session a notch lower at $78.09 for a solid year-to-date return of 38.7%. Barring minor hiccups, Waste Connections’ share prices have steadily been on an uptrend since June this year.
Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock has the wherewithal to continue its growth curve. The stock is currently trading at a forward P/E of 31.9x and has long-term earnings growth expectation of 6%.
Growth Drivers
Last week, Waste Connections reported solid second-quarter 2016 results with healthy year-over-year increase in both revenues and adjusted earnings, driven by a diligent execution of operational plans. Adjusted net income for the reported quarter was $93.2 million or 66 cents per share compared with $61.6 million or 50 cents per share in the year-ago quarter. Adjusted earnings also beat the Zacks Consensus Estimate by 12 cents.
Revenues came in at approximately $727.6 million during the quarter, up from $531.3 million a year ago, and beat the Zacks Consensus Estimate of $711 million. The top line was driven by 46.7% growth at the Solid Waste Collection segment and reflected strong underlying fundamentals owing to its recent merger with rival Progressive Waste Solutions Ltd.
The merger, completed in June this year, created an industry leader with enhanced scale and a stronger financial profile. The combined company has pro forma revenue of approximately $4.1 billion and operates an integrated network of solid waste operations across North America with complementary footprints. The merged entity is expected to benefit from a diverse revenue base with strategic assets uniquely positioned for continued growth. In addition, the combination is expected to generate approximately $50 million in annualized SG&A cost savings within the first 12 months after closing, with operational and safety-related improvements and market rationalization contributing additional upside over the long-term.
Waste Connections generally focuses on providing vertically integrated services, from collection through disposal of solid waste in landfills that it owns or operates. In addition, the operations are managed on a decentralized basis to place decision-making authority close to the customer, enabling it to identify and address customers’ needs on a real-time basis in a cost-effective manner. This low-overhead, highly-efficient operational structure allows it to expand into geographically contiguous markets and operate in relatively small communities that other competitors may not find attractive.
All these measures for a relatively healthy growth impetus for the near future probably raised investor confidence and drove the shares to a 52-week high.
Other Stocks to Consider
Some better-ranked stocks in the industry include Illinois Tool Works Inc. (ITW - Free Report) , Luxfer Holdings PLC (LXFR - Free Report) and Metso Corporation , each carrying a Zacks Rank #2 (Buy).
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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Waste Connections (WCN) Hits 52-Week High on Core Focus
Shares of waste management services provider Waste Connections Inc. (WCN - Free Report) scaled a new 52-week high of $78.38 on Aug 9, before closing the trading session a notch lower at $78.09 for a solid year-to-date return of 38.7%. Barring minor hiccups, Waste Connections’ share prices have steadily been on an uptrend since June this year.
Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock has the wherewithal to continue its growth curve. The stock is currently trading at a forward P/E of 31.9x and has long-term earnings growth expectation of 6%.
Growth Drivers
Last week, Waste Connections reported solid second-quarter 2016 results with healthy year-over-year increase in both revenues and adjusted earnings, driven by a diligent execution of operational plans. Adjusted net income for the reported quarter was $93.2 million or 66 cents per share compared with $61.6 million or 50 cents per share in the year-ago quarter. Adjusted earnings also beat the Zacks Consensus Estimate by 12 cents.
Revenues came in at approximately $727.6 million during the quarter, up from $531.3 million a year ago, and beat the Zacks Consensus Estimate of $711 million. The top line was driven by 46.7% growth at the Solid Waste Collection segment and reflected strong underlying fundamentals owing to its recent merger with rival Progressive Waste Solutions Ltd.
WASTE CONNECTN Price and Consensus
WASTE CONNECTN Price and Consensus | WASTE CONNECTN Quote
The merger, completed in June this year, created an industry leader with enhanced scale and a stronger financial profile. The combined company has pro forma revenue of approximately $4.1 billion and operates an integrated network of solid waste operations across North America with complementary footprints. The merged entity is expected to benefit from a diverse revenue base with strategic assets uniquely positioned for continued growth. In addition, the combination is expected to generate approximately $50 million in annualized SG&A cost savings within the first 12 months after closing, with operational and safety-related improvements and market rationalization contributing additional upside over the long-term.
Waste Connections generally focuses on providing vertically integrated services, from collection through disposal of solid waste in landfills that it owns or operates. In addition, the operations are managed on a decentralized basis to place decision-making authority close to the customer, enabling it to identify and address customers’ needs on a real-time basis in a cost-effective manner. This low-overhead, highly-efficient operational structure allows it to expand into geographically contiguous markets and operate in relatively small communities that other competitors may not find attractive.
All these measures for a relatively healthy growth impetus for the near future probably raised investor confidence and drove the shares to a 52-week high.
Other Stocks to Consider
Some better-ranked stocks in the industry include Illinois Tool Works Inc. (ITW - Free Report) , Luxfer Holdings PLC (LXFR - Free Report) and Metso Corporation , each carrying a Zacks Rank #2 (Buy).
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 >>