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Why Is Waste Connections (WCN) Down 0.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Waste Connections (WCN - Free Report) . Shares have lost about 0.9% 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 drivers.

Waste Connections Beats on Q3 Earnings & Revenues Estimates

Waste Connections reported solid third-quarter 2019 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings of 73 cents per share beat the consensus estimate by a penny and increased 5.8% year over year. Revenues of $1.41 billion beat the consensus mark by $7.1 million and improved 10.2% year over year.

The company has gained $82.8 million of revenues from acquisitions completed since the year-ago period.

Revenues by Segment

Solid Waste Collection segment revenues increased 13.7% year over year to $988.26 million. The segment accounted for 70% of total revenues.

Solid Waste Disposal and Transfersegment revenues increased 9.1% from the year-ago quarter to $317.66 million. The segment contributed 22.5% to total revenues.

E&P Waste Treatment, Recovery and Disposal segment revenues increased 2.5% from the year-ago quarter to $66.41 million. The segment contributed 4.7% to total revenues.

Intermodal and Other segment revenues declined 20.9% to $26.37 million. The segment accounted for 1.8% of total revenues.

Solid Waste Recycling segment revenues declined 38.6% year over year to $13.75 million. The segment accounted for 1% of total revenues.

Operating Results

Adjusted EBITDA in the third quarter was $443.56 million compared with $416.81 million in the year-ago quarter. Adjusted EBITDA margin came in at 31.4% compared with 32.5% in the year-ago quarter. 

Operating income totaled $236.60 million compared with $232.87 million in the year-ago quarter. Operating margin was 16.8% compared with 18.2% in the year-ago quarter.

Balance Sheet and Cash Flow

Waste Connections exited third-quarter 2019 with cash and cash equivalents of $303.78 million compared with $209.21 million at the end of the prior quarter. Long-term debt was $4.04 billion compared with $4.08 billion at the end of the prior quarter.

The company generated $432.38 million of cash from operating activities in the reported quarter. Adjusted free cash flow was $259.03 million and capital expenditures totaled $179.74 million.

Waste Connections paid out dividend of $42.13 million in the reported quarter. The company increased its regular quarterly cash dividend by 15.6%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Waste Connections has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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