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Waste Management Hits 52-Week High on Core Focus

Shares of Waste Management, Inc. WM scaled a 52-week high of $61.49 during yesterday’s trading session, before closing a notch lower at $61.35. Despite its price appreciation, this Zacks Rank #3 (Hold) stock still has the potential to further drive its price upward. The stock is currently trading at a forward P/E of 21.9x and has long-term earnings growth expectation of 8.5%.

Growth Drivers

Waste Management reported relatively strong first-quarter 2016 results with net income of $258 million or 58 cents per share, reversing the net loss of $129 million or 28 cents per share in the year-ago quarter. The turnaround was attributable to the year-over-year increase in revenues in the reported quarter and loss related to early extinguishment of debt in the year-earlier quarter. The company’s earnings comfortably beat the Zacks Consensus Estimate by 3 cents.

Revenues for the reported quarter were $3,176 million compared with $3,040 million in the year-ago quarter. Reported revenues also beat the Zacks Consensus Estimate of $3,076 million. The year-over-year rise in revenues was driven by accretive acquisitions net of divestitures, and an increase in volume and yield in its collection and disposal business.

Waste Management is successfully executing its initiatives to refocus on core business activities and instill price and cost discipline to achieve better margins. At the same time, the company aims to improve customer retention by providing better service and higher value solutions. Waste Management's successful cost-reduction initiatives have further helped it to achieve remarkable gross margin expansion and EBITDA growth over the quarters.

In addition, Waste Management plans to return significant cash to shareholders through healthy dividends and share repurchases in the future quarters. A steady dividend payment policy is part of Waste Management’s long-term strategy of providing attractive risk-adjusted returns to its stockholders. The company’s investment strategy takes a holistic view of the rapidly evolving market and deploys a dynamic capital allocation approach to execute its growth strategy. Furthermore, decent dividend increases at periodic intervals have been one of the company’s most attractive features.

Moving forward, Waste Management maintained its 2016 adjusted earnings per share guidance in the range of $2.74 to $2.79. Free cash flow is expected between $1.5 billion and $1.6 billion.

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

Stocks to Consider

Stocks that look promising and are worth a look include Nuverra Environmental Solutions, Inc. NESC, Quest Resource Holding Corporation QRHC and US Ecology, Inc. ECOL, each carrying a Zacks Rank #2 (Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
WASTE MGMT-NEW (WM): Free Stock Analysis Report
QUEST RES HLDG (QRHC): Free Stock Analysis Report
US ECOLOGY INC (ECOL): Free Stock Analysis Report
NUVERRA ENV SOL (NESC): Free Stock Analysis Report
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