Waste Management Beats on Q1 Earnings - Analyst Blog

Waste Management, Inc. WM reported strong first quarter 2014 results driven by a solid execution of operational plans and a healthy momentum in both yield and cost controls. Net income for the reported quarter was $228 million or 49 cents per share versus $168 million or 36 cents per share in the year-ago quarter. The reported earnings exceeded the Zacks Consensus Estimate by 4 cents.

Quarter in Detail
    
Revenues for the first quarter of 2014 increased 1.8% to $3,396 million but were below the Zacks Consensus Estimate of $3,430 million. The year-over-year increase in earnings was primarily due to an internal revenue growth from yield (for collection and disposal operations) of 2.6% – the highest level reached since 2011.

Core price (including price increases and fees, other than the company's fuel surcharge, net of rollbacks) was 4.2% in the reported quarter versus 3.2% in the year-ago quarter.

Revenues from the company's Collection business increased to $2,074 million in the reported quarter from $2,055 million in the year-earlier quarter. Landfill revenues improved marginally to $632 million from $628 million in the prior-year period. Recycling revenues declined to $347 million from $358 million, while Transfer revenues were up by $6 million to $306 million and Wheelabrator revenues increased 12.2% to $230 million.

Operating expenses increased by $23 million to $2,232 million in the reported quarter, driven by higher cost related to recently acquired businesses and labor expense. SG&A expenses stood at $375 million in the reported quarter versus $390 million in the year-ago quarter.

Financials

Cash and cash equivalents stood at $339 million as of Mar 31, 2014, while long-term debt (less current portion) stood at $8,978 million.

Net cash provided by operations improved to $584 million in the reported quarter from $577 million in the year-ago period. Capital expenditures remained relatively flat at $266 million. Net proceeds from divestiture were $166 million primarily related to the sale of its China waste-to-energy joint venture. This resulted in free cash flow of $484 million – the highest since 2008.

During the quarter, Waste Management returned $174 million to shareholders in dividends.

Outlook

Waste Management updated its free cash flow guidance for full year 2014. The company presently expects free cash flow to be within $1.4 billion to $1.5 billion, up from $1.3 billion expected earlier. However, the company refrained from providing any additional input to the other elements of its earlier guidance due to seasonality and will update the same only after the second quarter results.

Waste Management currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth considering include Stericycle, Inc. SRCL, Waste Connections Inc. WCN and Global Payments Inc. GPN, each carrying a Zacks Rank #2 (Buy).