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Waste Management (WM) Beats on Q2 Earnings, View Up

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Despite a challenging macroeconomic environment, Waste Management, Inc. (WM - Free Report) reported strong second-quarter 2016 results with GAAP net income of $287 million or 64 cents per share, compared with $274 million or 60 cents per share in the year-ago quarter. The year-over-year increase in earnings was attributable to higher revenues during the reported quarter.

Adjusted earnings for second-quarter 2016 were $329 million or 74 cents per share compared with $306 million or 67 cents per share in the year-earlier quarter. The adjusted earnings comfortably beat the Zacks Consensus Estimate by 3 cents.

Waste Management Inc. (WM - Free Report) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

Quarter Details

Revenues for the reported quarter increased to $3,425 million from $3,315 million in the year-ago quarter. The year-over-year rise in revenues was driven by accretive acquisitions net of divestitures, and an increase in volume and yield in its collection and disposal business. Revenues exceeded the Zacks Consensus Estimate of $3,386 million.

Internal revenue growth from yield (for collection and disposal operations) was 2.6% in the reported quarter, up 90 basis points year over year. Core price (including price increases and fees, other than the company’s fuel surcharge, net of rollbacks) was 4.9% in the reported quarter, up from 4.1% in the second quarter of 2015. Average recycling commodity prices improved 2.3% year over year, while recycling volumes decreased 2.9%.

Revenues from the company’s Collection business increased to $2,211 million in the reported quarter from $2,141 million in the year-ago quarter. Landfill revenues improved to $792 million from $758 million in the prior-year quarter. Recycling revenues declined to $290 million from $299 million, while Transfer revenues were up by $29 million to $391 million.

Operating margin in the reported quarter improved to 62.2% from 65.2% in the year-ago quarter, representing a 300 bps improvement due to stringent cost-management efforts. Operating EBITDA increased $127 million year over year to $951 million.

Balance Sheet & Cash Flow

Cash and cash equivalents were $39 million at quarter end with long-term debt (less current portion) of $8,916 million.

Net cash from operating activities for the first six months of the year was $1,454 million compared with $1,315 million in the year-ago period. Capital expenditures in the first half of 2016 were $629 million versus $529 million in the year-ago period.

Free cash flow was $447 million in second-quarter 2016, compared with $579 million in the year-earlier quarter, bringing the respective tallies for the first six months of the year to $849 million and $864 million.

During the quarter, the company returned $431 million to its shareholders, comprising $181 million of dividends and $250 million of share repurchases.

WASTE MGMT-NEW Price, Consensus and EPS Surprise

WASTE MGMT-NEW Price, Consensus and EPS Surprise | WASTE MGMT-NEW Quote

Guidance Revised Up

With strong yield, volume, and cost performance in the first half of the year, the company revised its 2016 adjusted earnings guidance up in the range of $2.83 and $2.86 per share, representing a $0.09 to $0.12 increase from the previous guidance of $2.74 to $2.79. Free cash flow is currently expected between $1.6 billion and $1.7 billion, up from the range of $1.5 billion and $1.6 billion anticipated earlier.

Waste Management currently has a Zacks Rank #2 (Buy). Some other favorably -ranked stocks in the broader industry include Republic Services, Inc. (RSG), Accenture plc (ACN - Free Report) and Accretive Health, Inc. , each carrying the same Zacks Rank as Waste Management.

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