Waste Management Hits 52-Week High on Q3 Earnings Beat - Analyst Blog

Shares of Waste Management, Inc. (WM) scaled a 52-week high of $49.66 on Nov 7, 2014, before closing the trading session a notch lower at $49.45. This translates to a decent year-to-date return of 10.2%.

Waste Management's share price has been on an uptrend since August this year. Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock still has the wherewithal to further drive its price upward. The stock is currently trading at a forward P/E of 20.6x and has a long-term earnings growth expectation of 8.1%.

Growth Drivers

Modest third-quarter 2014 results, including relatively better year-over-year adjusted earnings, a decent earnings beat and an accretive acquisition were the primary driving factors for Waste Management.

Adjusted earnings were 72 cents per share in the reported quarter versus 65 cents in the year-ago period. The recurring earnings well exceeded the Zacks Consensus Estimate of 68 cents.

Last month, Waste Management and leveraged buyout fund advisor aPriori Capital Partners L.P. inked a joint venture agreement to acquire Deffenbaugh Disposal, Inc. Headquartered in Kansas City, Deffenbaugh is one of the largest privately owned disposal firms in the Midwest, operating a portfolio of one municipal solid waste landfill, one construction and demolition landfill, two material recovery facilities, and seven transfer stations.

With 1.7 million tons of waste and recyclable material collections in 2013, Deffenbaugh is a strategic fit for Waste Management and will enable it to focus on its core businesses. At the same time, the transaction enables Waste Management to extend its geographic footprint and make a foray in the attractive market of Kansas City, where it has limited presence.

All these measures probably raised investor confidence and drove the shares to a 52-week high.

Other Stocks to Consider

Other players in the industry worth mentioning include US Ecology, Inc. (ECOL), Vertex Energy, Inc. (VTNR) and Waste Connections Inc. (WCN), each carrying a Zacks Rank #2 (Buy).