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Waste Management (WM) Down 1.7% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Waste Management (WM - Free Report) . Shares have lost about 1.7% 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 Management 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 drivers.

Waste Management Tops Q3 Earnings

Waste Management reported mixed third-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.

Adjusted earnings per share of $1.19 beat the consensus mark by 3 cents and were higher than the year-ago quarter by 4 cents. Total revenues of $3.96 billion missed the consensus estimate by $31 million but increased 3.8% year over year.

The top line benefited from strong yield and volume growth in the company’s collection and disposal business, which contributed $198 million of incremental revenues.

Internal revenue growth from yield for collection and disposal operations was 2.6% compared with 2.5% in the year-ago quarter. Collection and disposal business internal revenue growth from volume was 3.3% in third-quarter 2019. Total company internal revenue growth from volume, which includes recycling and other ancillary businesses, was 2.6%.

Quarterly Numbers in Detail

The Collection segment recorded revenues of $2.63 billion, up 5.6% from the prior-year quarter’s figure. Landfill segment’s top line increased 7.2% year over year to $993 million. Total revenues in the Transfer segment were up 5.8% to $471 million. Recycling segment revenues declined 27.3% to $245 million. Other businesses’ revenues totaled $469 million, up 9.1% year over year. 

Adjusted operating EBITDA of $1.14 billion increased 3.1% from the year-ago quarter’s level. Adjusted operating EBITDA margin decreased to 28.8% from 28.9% in the year-ago quarter. Operating income came in at $734 million compared with $699 million in the year-ago quarter. Operating income margin increased to 18.5% from 18.3% in the year-ago quarter.

Waste Management exited third-quarter 2019 with cash and cash equivalents of $2.92 billion compared with $2.25 billion at the end of the prior quarter. Long-term debt was $13.15 billion compared with $12.62 billion at the end of the prior quarter.

The company generated $953 million of cash from operating activities and capital expenditure was $483 million. Free cash flow was $478 million compared with $480 million in the prior-year quarter. The company paid out dividends worth $218 million in third-quarter 2019. It spent $76 million on acquisitions of traditional solid waste businesses during the reported quarter.

2019 Guidance

Waste Management reaffirmed its full-year 2019 guidance. The company continues to expect adjusted EPS in the range of $4.28-$4.38. Adjusted operating EBITDA is expected in the range of $4.40-$4.45 billion. Free cash flow is anticipated between $2.025 and $2.075 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

Currently, Waste Management has a nice Growth Score of B, a grade with the same score on the momentum front. 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.

Outlook

Waste Management has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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