Waste Management (WM) Outshines Q3 Earnings Estimates - Analyst Blog

Waste Management (WM) reported net income of $270 million or 58 cents per share in the third quarter of 2014 versus $291 million or 62 cents per share in the year-ago period. The results were impacted by $66 million of after-tax charges primarily related to restructuring of several corporate functions and legal reserves.

Excluding one-time items, adjusted earnings per share (EPS) stood at 72 cents in the reported quarter versus EPS of 65 cents in the year-ago period. The recurring earnings exceeded the Zacks Consensus Estimate of 68 cents.
 

Quarter in Detail
    
Revenues for the third quarter of 2014 stood at $3,602 million versus $3,621 million in the year-ago period. The reported revenues lagged the Zacks Consensus Estimate of $3,662 million. The decline in revenues was related to divestiture of operations and the impact of foreign currency translation.

Internal revenue growth from yield (for collection and disposal operations) stood at 2.3% in the reported quarter.

Core price (including price increases and fees, other than the company's fuel surcharge, net of rollbacks) was 3.8% in the reported quarter.

Internal revenue growth from volume reported a decline of 1.3% in the reported quarter.

Revenues from the company's Collection business decreased to $2,165 million in the reported quarter from $2,193 million in the year-ago period. Landfill revenues improved marginally by 2.3% to $758 million from $741 million in the prior-year period. Recycling revenues declined to $351 million from $367 million, while Transfer revenues were up by $2 million to $354 million. Wheelabrator revenues were down 4.2% to $205 million.

Operating expenses decreased by $26 million to $2,299 million in the quarter, driven by improvement in recycling operations and the company's solid waste operations. SG&A expenses stood at $377 million versus $349 million in the prior-year period.

Financials

Cash and cash equivalents stood at $183 million as of Sep 30, 2014, while long-term debt (less current portion) stood at $9,023 million.

Net cash provided by operations for nine months ended Sep 2014 stood at $1,811 million in the reported quarter versus $1,858 million in the prior-year period. Capital expenditure stood at $781 million for nine months ended Sep 2014 versus $824 million in the prior-year period.

Free cash flow stood at $418 million in the reported quarter versus $452 million in the year-ago quarter.

During the quarter, Waste Management returned $172 million to shareholders in dividends.  Also, the company entered into a share repurchase program to return $600 million of cash flow to its shareholders through share repurchases.

Outlook

Waste Management expects free cash flow to exceed the $1.5 billion range in 2014. The company expects adjusted EPS of 60 cents in fourth-quarter 2014 and $2.41 for 2014.
 
Going forward, the company expects to strengthen its core business and return cash to its shareholders.

Waste Management currently has a Zacks Rank # 4 (Sell). Other stocks that look promising and are worth a look include Waste Connections Inc (WCN), Exponent Inc (EXPO) and Information Services Group, Inc (III) each carrying a Zacks Rank #2 (Buy).