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Waste Connections (WCN) Misses Q3 Earnings by a Whisker
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Integrated solid waste services firm Waste Connections Inc. (WCN - Free Report) reported relatively healthy third-quarter 2016 results, with adjusted net income of $126.5 million or 72 cents per share, compared with $66.5 million or 54 cents per share in the year-ago quarter. The year-over-year increase in adjusted earnings was primarily attributable to a nearly two-fold rise in revenues during the quarter. However, adjusted earnings marginally missed the Zacks Consensus Estimate by a penny.
GAAP earnings for the reported quarter were $88.6 million or 50 cents per share as against a loss of $257 million or a loss of $2.08 per share in the year-ago quarter. The significant improvement in GAAP earnings was largely due to top-line growth.
Revenues came in at approximately $1,084.9 million, up from $547.9 million a year ago, primarily due to the contribution of $513.1 million from the accretive Progressive Waste acquisition. Quarterly revenues exceeded the Zacks Consensus Estimate of $1,073 million.
Operating income for the reported quarter was $158.7 million as against a loss of $375.2 million in prior-year period, owing to net impairment charges of approximately $493.4 million associated with the E&P segment. Adjusted earnings before interest, taxes, depreciation and amortization increased to $342.3 million from $189.0 million in the year-ago quarter.
Segment Revenues
Solid Waste Collection segment was the highest contributor to total revenues in the quarter at 69.9%. The segment revenues increased significantly from $353.2 million in the year-earlier quarter to $757.8 million.
Solid Waste Disposal and Transfer contributed 21.5% to the overall revenue. Quarterly revenues were up to $233.5 million from $114.1 million in the prior-year quarter. Solid Waste Recycling revenues improved to $29.6 million (2.7%) from $12.1 million a year ago.
E&P Waste Treatment, Recovery and Disposal saw a major drop in revenues to $30.1 million (2.8%) from $51.2 million in the year-ago quarter, owing to a continued drop in drilling activity throughout the period.
Finally, Intermodal and Other contributed 3.1% to the total revenue, and increased to $33.9 million from $17.3 million in the prior-year quarter.
At quarter end, Waste Connections had cash and cash equivalents of $119.3 million and long-term debt and notes payable of $3,662.0 million.
Net cash from operating activities was $538.8 million for the first nine months of 2016 compared with $463.3 million in the year-ago period. Adjusted free cash flow was $205.8 million for the quarter compared with $78.5 million in the prior-year period, bringing the respective tallies for the first nine months of 2016 and 2015 to $440.3 million and $298.6 million.
The strong free cash flow profile following the Progressive Waste acquisition has enabled Waste Connections to increase its quarterly cash dividend by 24.1% to 18 cents per share, while maintaining a payout ratio at less than 20% of expected annual free cash flow. This financial strength and flexibility, together with expanded footprint following the acquisition, will likely facilitate the company to better execute its long-term growth strategy, while increasing shareholder returns.
Waste Management has a long-term earnings growth expectation of 9% and is currently trading at a forward P/E of 22.0x.
Republic Services has a long-term earnings growth expectation of 8.7% and is currently trading at a forward P/E of 23.5x.
Carbonite has a long-term earnings growth expectation of 30.0% and is currently trading at a forward P/E of 111.1x.
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Waste Connections (WCN) Misses Q3 Earnings by a Whisker
Integrated solid waste services firm Waste Connections Inc. (WCN - Free Report) reported relatively healthy third-quarter 2016 results, with adjusted net income of $126.5 million or 72 cents per share, compared with $66.5 million or 54 cents per share in the year-ago quarter. The year-over-year increase in adjusted earnings was primarily attributable to a nearly two-fold rise in revenues during the quarter. However, adjusted earnings marginally missed the Zacks Consensus Estimate by a penny.
GAAP earnings for the reported quarter were $88.6 million or 50 cents per share as against a loss of $257 million or a loss of $2.08 per share in the year-ago quarter. The significant improvement in GAAP earnings was largely due to top-line growth.
Revenues came in at approximately $1,084.9 million, up from $547.9 million a year ago, primarily due to the contribution of $513.1 million from the accretive Progressive Waste acquisition. Quarterly revenues exceeded the Zacks Consensus Estimate of $1,073 million.
Operating income for the reported quarter was $158.7 million as against a loss of $375.2 million in prior-year period, owing to net impairment charges of approximately $493.4 million associated with the E&P segment. Adjusted earnings before interest, taxes, depreciation and amortization increased to $342.3 million from $189.0 million in the year-ago quarter.
Segment Revenues
Solid Waste Collection segment was the highest contributor to total revenues in the quarter at 69.9%. The segment revenues increased significantly from $353.2 million in the year-earlier quarter to $757.8 million.
Solid Waste Disposal and Transfer contributed 21.5% to the overall revenue. Quarterly revenues were up to $233.5 million from $114.1 million in the prior-year quarter. Solid Waste Recycling revenues improved to $29.6 million (2.7%) from $12.1 million a year ago.
E&P Waste Treatment, Recovery and Disposal saw a major drop in revenues to $30.1 million (2.8%) from $51.2 million in the year-ago quarter, owing to a continued drop in drilling activity throughout the period.
Finally, Intermodal and Other contributed 3.1% to the total revenue, and increased to $33.9 million from $17.3 million in the prior-year quarter.
WASTE CONNECTN Price, Consensus and EPS Surprise
WASTE CONNECTN Price, Consensus and EPS Surprise | WASTE CONNECTN Quote
Balance Sheet & Cash Flow
At quarter end, Waste Connections had cash and cash equivalents of $119.3 million and long-term debt and notes payable of $3,662.0 million.
Net cash from operating activities was $538.8 million for the first nine months of 2016 compared with $463.3 million in the year-ago period. Adjusted free cash flow was $205.8 million for the quarter compared with $78.5 million in the prior-year period, bringing the respective tallies for the first nine months of 2016 and 2015 to $440.3 million and $298.6 million.
The strong free cash flow profile following the Progressive Waste acquisition has enabled Waste Connections to increase its quarterly cash dividend by 24.1% to 18 cents per share, while maintaining a payout ratio at less than 20% of expected annual free cash flow. This financial strength and flexibility, together with expanded footprint following the acquisition, will likely facilitate the company to better execute its long-term growth strategy, while increasing shareholder returns.
Waste Connections currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Waste Management, Inc. (WM - Free Report) , Republic Services, Inc. (RSG - Free Report) and Carbonite, Inc. , each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Waste Management has a long-term earnings growth expectation of 9% and is currently trading at a forward P/E of 22.0x.
Republic Services has a long-term earnings growth expectation of 8.7% and is currently trading at a forward P/E of 23.5x.
Carbonite has a long-term earnings growth expectation of 30.0% and is currently trading at a forward P/E of 111.1x.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>