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Waste Connections (WCI) Q1 Earnings In Line, Revenues Top

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Waste Connections, Inc. (WCN - Free Report) reported decent first-quarter 2018 results, wherein the bottom line met the Zacks Consensus Estimate and the top line surpassed the same.

Adjusted earnings of 56 cents per share matched the consensus mark and increased 14.2% year over year.

Total revenues of $1.14 billion beat the Zacks Consensus Estimate of $1.13 billion. The figure was up 4.5% year over year. Strength across the majority of the segments and favorable impact of $10.8 million from solid waste acquisitions, net of divestitures drove the top line. The company has gained almost $165 million of total annual revenue from its acquisitions year to date.

 

We observe that shares of Waste Connections have gained 20.5% over the past year outperforming the industry’s gain of 6.9%.

 

Let’s check out the numbers.

Revenues by Segment

Solid Waste Collection segment revenues increased 5.4% year over year to $807.25 million. The segment accounted for 70.8% of total revenues.

Solid Waste Disposal and Transfer segment revenues increased 3.6% from the year-ago quarter to $221.36 million. The segment contributed 19.4% to total revenues.

E&P Waste Treatment, Recovery and Disposal segment revenues increased 50.8% from the year-ago quarter to $55.6 million. The segment contributed 4.9% to total revenues.

Intermodal and Other segment revenues increased barely by 0.1% to $33.4 million. The segment accounted for 2.9% of total revenues.

Solid Waste Recycling segment revenues declined 45.5% year over year to $22.5 million. The segment accounted for 2% of total revenues.

Operating Results

Adjusted EBITDA increased 7.2% year over year to $356.92 million. Adjusted EBITDA margin rose to 31.3% from 30.5% in the year-ago quarter. 

Operating income increased to $188.71 million from $26.4 million in the year-ago quarter. Operating margin was 16.6% compared with 2.4% in the year-ago quarter. 

Balance Sheet and Cash Flow

Waste Connections exited first-quarter 2018 with cash and cash equivalents of $217.54 million compared with $433.82 million at the end of December 2017. As of Mar 31, 2018, long-term debt was $3,878.69 million compared with $3,899.57 million at the end of December 2017.

The company generated $307.25 million of cash from operating activities in the reported quarter compared with $287.48 million in the year-ago quarter. Adjusted free cash flow was $220.15 million compared with $237.49 million in the year-ago quarter.

During the reported quarter, the company returned $42 million to shareholders through share repurchases and $36.8 million through dividend payments.

Concurrent with earnings, the company’s board of directors announced a quarterly cash dividend of 14 cents per share, payable on May 30 to shareholders of record as of May 16. 

Second Quarter Outlook

Waste Connections expects revenues to be around $1.23 billion. The Zacks Consensus Estimate is pegged at $1.22 billion.

Adjusted EBITDA is estimated around $395 million (almost 32.2% of revenue), marking an improvement of 40 basis points from the year-ago quarter.

Depreciation and amortization expenses are expected to be around $13.9% of revenues. Of this, amortization of intangibles is expected around $26.5 million or 7 cents per share net of taxes. Interest expense net of interest income is anticipated around $32.5 million. Further, the company expects effective tax rate to be about 23% in second-quarter 2018.

Zacks Rank & Upcoming Releases

Waste Connections currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Business Services sector are keenly awaiting earnings reports from key players like Gartner, Inc. (IT - Free Report) , The Dun & Bradstreet Corp. (DNB - Free Report) and Broadridge Financial Solutions Inc. (BR - Free Report) . While Garter and Dun & Bradstreet will release first-quarter 2018 results on May 8 and May 9, respectively, Broadridge will report third-quarter fiscal 2018 numbers on May 8.

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