A month has gone by since the last earnings report for Waste Management (
WM Quick Quote WM - Free Report) . Shares have added about 0.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Waste Management due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Waste Management Q1 Earnings Beat Estimates Waste Management reported impressive first-quarter 2023 results, wherein both earnings and revenues surpassed the respective Zacks Consensus Estimate.
Adjusted earnings per share (excluding 1 cent from non-recurring items) of $1.31 beat the Zacks Consensus Estimate by 3.2% and our estimate by 7.4%, and improved 1.6% year over year. Total revenues of $4.89 billion surpassed the Zacks Consensus Estimate by 1% and our estimate by 1.6%, and increased 5% year over year.
Quarterly Numbers in Detail
The Collection segment recorded revenues of $3.37 billion, up 9.4% from the prior-year quarter’s figure. The Landfill segment’s top line grew 9.5% year over year to $1.15 billion. Total revenues in the Transfer segment were up 11.1% to $540 million.
The Recycling segment’s revenues dropped 21% to $358 million. Other businesses’ revenues totaled $613 million, up 6.6% year over year.
Adjusted operating EBITDA of $1.33 billion increased 3.7% from the year-ago quarter’s level. Adjusted operating EBITDA margin fell 40 basis points to 27.2% from the prior-year quarter.
Adjusted operating income came in at $828 million, up 3.1% from the year-ago quarter’s level. Adjusted operating income margin dropped to 16.9% and was 80 basis points lower than the year-ago reported figure.
Balance Sheet and Cash Flow
Waste Management exited first-quarter 2023 with cash and cash equivalents of $257 million, compared with $351 million at the end of the prior quarter. Long-term debt (less current portion) was $15 billion, compared with $14.6 billion at the end of the prior quarter.
WM generated $1.04 billion in cash from operating activities in the reported quarter, while capital expenditures were $504 million. Free cash flow was $395 million.
During the reported quarter, Waste Management returned $639 million to its shareholders, including $289 million through cash dividends and $350 million through share repurchases.
The company reaffirmed its 2023 outlook. Total revenue growth is expected to be between 4% and 5.5%, which includes organic revenue growth of nearly 5.5% from the collection and disposal business. Adjusted operating EBITDA is expected in the range of $5.825-$5.975 billion. Free cash flow is estimated to be between $2.6 billion and $2.7 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
Currently, Waste Management has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Waste Management has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.