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Waste Management Inc. (WM - Analyst Report) reported a net income of $224 million or 48 cents per share in the fourth quarter of 2012 compared with $266 million, 58 cents per share in the year-ago quarter. Adjusted earnings per share (EPS) stood at 57 cents in the quarter versus 63 cents in the year-ago quarter.

Adjusted earnings in the quarter missed the Zacks Consensus Estimate of 61 cents. The year-over-year fall was due to a decline in recycling and electricity commodity prices in the quarter.

For fiscal 2012, EPS was $1.76 versus $2.04 in the year-ago period. For fiscal 2012, adjusted EPS was $2.08 compared with $2.14 in the year-ago period.  Adjusted EPS for the year was in line with the Zacks Consensus Estimate

Quarter in Detail
 
Revenues increased 0.8% to $3,434 million in fourth quarter 2012. The quarterly sales were ahead of the Zacks Consensus Estimate of $3,396 million.  For full year 2012, revenues increased 2.0% to $13.65 billion.

Internal revenue growth from volumes inched up 0.4% for the quarter. Internal revenue growth from yield for collection and disposal operations was 0.9% for the reported quarter.
 
Revenues from the company’s Collection business dipped 0.6% to $2.1 billion in the reported quarter. Landfill revenues escalated 2.6% to $689 million, Transfer revenues increased 5.9% to $335 million, Wheelabrator revenues inched up 0.9% to $215 million and Recycling revenues declined 6.9% to $330 million.
 
Operating expenses increased by $79 million from the prior-year quarter to $2,224 million in the reported quarter.

Financials
 
Cash and cash equivalents decreased to $194 million as of Dec 31, 2012 from $258 million in the prior-year period. Long-term debt stood at $9173 million as of Dec 31, 2012 versus $9125 million in the year-ago period. The debt-to-capitalization ratio stood at 59.8% as Dec 31, 2012 compared to 60.4% in the year ago period.
    
In the reported quarter, net cash provided by operating activities was $577 million and free cash flow was $215 million. For full year, Waste Management returned $658 million in dividends to its shareholders.

Outlook
 
Waste Management now expects 2013 adjusted EPS in the range of $2.15 -$2.20. Internal revenue growth from yield on the collection and disposal business is expected to be in the range of 1.0% to 1.5%. Internal revenue growth from volume is expected to be between 0.5% and 1.0%

Free cash flow is projected between $1.1 billion and $1.2 billion (excluding divestiture benefit).

However, the company operates in an intensely competitive landscape that includes big players such as Clean Harbors, Inc (CLH - Snapshot Report) and Stericycle, Inc (SRCL - Analyst Report).

Waste Management currently has a Zacks Rank #2 (Buy). One of its competitors, Tower Watson & Co (TW - Snapshot Report) also carries a Zacks Rank #1 (Strong Buy).

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