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Why Is Waste Connections (WCN) Down 3.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for Waste Connections (WCN - Free Report) . Shares have lost about 3.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Waste Connections due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Waste Connections Surpasses Q2 Earnings & Revenue Estimates

Waste Connections reported better-than-expected second-quarter 2020 results.

Adjusted earnings of 60 cents per share beat the Zacks Consensus Estimate by 9.1% but decreased 13% year over year. Revenues of $1.31 billion beat the consensus mark by 0.4% but declined 4.7% year over year.

Revenues by Segment

Solid Waste Collection segment revenues decreased 1.1% year over year to $944.64 million. The segment accounted for 72.4% of total revenues.

Solid Waste Disposal and Transfer segment revenues decreased 8.2% from the year-ago quarter to $278.40 million. The segment contributed 21.3% to total revenues.

E&P Waste Treatment, Recovery and Disposal segment revenues decreased 44.5% from the year-ago quarter to $35.51 million. The segment contributed 2.7% to total revenues.

Intermodal and Other segment revenues declined 9.3% to $27.67 million. The segment accounted for 2.1% of total revenues.

Solid Waste Recycling segment revenues improved 19.8% year over year to $19.56 million. The segment accounted for 1.5% of total revenues.

Operating Results

Adjusted EBITDA in the reported quarter was $394.3 million compared with $425.3 million in the year-ago quarter. Adjusted EBITDA margin came in at 30.2% compared with 31.1% in the year-ago quarter. 

Operating loss totaled $232.4 million against operating income of $222.1 millionin the year-ago quarter.

Balance Sheet and Cash Flow

Waste Connections exited second-quarter 2020 with cash and cash equivalents of $790.55 million compared with $1.19 billion at the end of the prior quarter. Long-term debt was $4.69 billion compared with $5.16 billion at the end of the prior quarter.

The company generated $383.6 million of cash from operating activities in the reported quarter. Adjusted free cash flow was $258.8 million. Capital expenditure totaled $130.9 million.

Waste Connections paid out dividend of $48.9 million in the reported quarter.

2020 View

For the full year, Waste Connections expects revenues to be around $5.325 billion. Adjusted EBITDA is estimated to be around $1.610 billion. Capital expenditures are anticipated to be nearly $550 million. Net cash provided by operating activities is expected to be between $1.344 billion and $1.374 billion. Adjusted free cash flow is expected to be between $805 million and $835 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Waste Connections has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Waste Connections has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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