A month has gone by since the last earnings report for Waste Connections (WCN - Free Report) . Shares have added about 1.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Waste Connections 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 Connections Q3 Earnings & Revenues Top Estimates
Waste Connections reported strong third-quarter 2018 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.
Adjusted earnings per share (EPS) of 69 cents surpassed the consensus estimate by a penny and improved 15% year over year. The bottom line was positively impacted by price-driven earnings growth in solid waste segment and improved operational efficiency.
Quarterly revenues came in at $1.28 billion, which outpaced the consensus mark by $11 million. The reported figure increased 6.2% on a year-over-year basis. Strength across majority of the segments and a favorable impact of $48.2 million from solid waste acquisitions, net of divestitures drove the top line.
Continued strength in solid waste pricing growth, E&P waste activity and contributions from acquisitions aided the company’s results, offsetting recycling and cost related headwinds.
Revenues in Details
Solid Waste Collection segment revenues increased 6.9% year over year to $869.28 million. The segment accounted for 67.9% of total revenues.
Solid Waste Disposal and Transfer segment’s revenues rose 12.3% year over year to $291.29 million. It contributed 22.7% to total revenues.
E&P Waste Treatment, Recovery and Disposal segment revenues improved 18.4% year over year to $64.79 million. It contributed 5.1% to total revenues.
Intermodal and Other segment revenues decreased 11.8% year over year to $33.37 million. It accounted for 2.6% of total revenues.
Solid Waste Recycling segment revenues decreased 46.2% year over year to $22.4 million. It accounted for 1.7% of total revenues.
Adjusted EBITDA for the third quarter was $416.8 million compared with $393.4 million in the year-ago quarter. Adjusted EBITDA margin was 32.5% of total revenues compared with 32.6% in the prior-year quarter.
Operating income totalled $232.87 million compared with $218.77 million. Operating margin was 18.2% compared with 18.1% in the year-ago quarter.
Balance Sheet and Cash Flow
Waste Connections exited the third quarter with cash and cash equivalents balance of $244.39 million compared with $145.80 million in the previous quarter. Long-term debt at the end of the quarter was $3.90 billion compared with $3.79 billion at the end of the prior quarter.
Concurrent with the earnings release, the company’s board of directors announced a 14.3% increase in regular quarterly cash dividend.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
At this time, Waste Connections has a nice Growth Score of B, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Waste Connections has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.