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Covanta Posts Lower Earnings

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Covanta Holding Corporation’s (CVA - Free Report) fourth-quarter 2012 earnings of 20 cents per share missed the Zacks Consensus Estimate of 23 cents and the year-ago-quarter earnings of 26 cents. The decline was due to a higher effective tax rate, increased interest expense and the negative impact of Hurricane Sandy. These declines were partially offset by a lower number of shares outstanding due to the company's common stock buyback program.

On a reported basis, earnings came in at 62 cents per share, compared with 19 cents per share in the same quarter last year.

Quarter in Detail

In the fourth quarter the company reported revenue of $430 million, flat year over year and beating the Zacks Consensus Estimate of $410 million. The upside came from organic growth initiatives in special waste, recycled metals and other; and escalations in service fee contracts.

Operating expenses were $351 million compared with $345 million in the year-ago period, an increase of $6 million. Benefits from various operational improvements were more than offset by the negative impact of Hurricane Sandy and normal cost escalations.

Covanta Holding reported that its fourth-quarter net income attributable to the company was $82 million compared with $26 million in the same quarter last year.

Full-Year Highlights

In full-year 2012, earnings per share of 51 cents came below both the Zacks Consensus Estimate and full-year 2011 number of 54 cents.

Total revenues fell $6 million year over year in 2012 to $1.6 billion, in line with the Zacks Consensus Estimate.

Shareholder Returns and Liquidity

In 2012, the company doubled its annual cash dividend to 60 cents per share and returned $169 million to shareholders, consisting of $81 million in cash dividends and $88 million in share repurchases (3.9% of common stock outstanding). Since the inception of its buyback program the company has repurchased 25.8 million shares, or 16.7% of shares outstanding, at a weighted average cost of $16.00. As of Dec 31, 2012, Covanta had $87 million of share repurchase authorization remaining.


Covanta Holding, for full year 2013, expects adjusted earnings in the range of $0.40–$0.50 per share.


Covanta Holding is an internationally recognized owner and operator of large-scale Energy-from-Waste and renewable energy projects. Covanta's 44 Energy-from-Waste facilities provide communities with an environmentally sound solution to their solid waste disposal needs by using municipal solid waste to generate clean, renewable energy.

Annually, Covanta's Energy-from-Waste facilities convert approximately 20 million tons of waste into 9 million megawatt hours of clean renewable electricity and approximately 9 billion pounds of steam that are sold to a variety of industries.

In recent times, stiff competition and an overall tepid macroeconomic outlook are expected to remain headwinds. Hence, Covanta Holding currently holds a Zacks Rank #4 (Sell).

Other alternative energy companies that are currently performing well and warrant a look include Zacks Rank #1 (Strong Buy) stock EnergySolutions, Inc. (ES - Free Report) and Zacks Rank #2 (Buy) stocks Ormat Technologies Inc. (ORA - Free Report) and XZERES Corp. .

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