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Waste Management (WM) Reports Robust Q3 Earnings, Lifts View

Waste Management, Inc. WM reported strong third-quarter 2017 results, as adjusted earnings of 90 cents per share beat the Zacks Consensus Estimate of 88 cents and climbed 7.1% year over year.

The company reported GAAP net income of $386 million or 87 cents per share compared with $302 million or 68 cents per share recorded in the year-ago quarter. The year-over-year increase in earnings was primarily driven by higher revenues.

Quarter Details

Revenues for the reported quarter improved to $3,716 million from $3,548 million in the year-ago quarter. The year-over-year rise in revenues was driven by an increase in volume and yield in the company’s collection and disposal business as well as higher recycling commodity prices. Revenues marginally exceeded the Zacks Consensus Estimate of $3,712.4 million.

Internal revenue growth from yield (for collection and disposal operations) was 2% in the reported quarter. Traditional solid waste internal revenue growth from volume came in at 1.6%. Core price (including price increases and fees, other than the company’s fuel surcharge, net of rollbacks) was 4.7% in the reported quarter.

Waste Management, Inc. Price, Consensus and EPS Surprise


Revenues from the company’s Collection business increased to $2,351 million in the reported quarter from $2,254 million recorded in the year-ago quarter. Landfill revenues improved to $884 million from $831 million in the prior-year quarter. Recycling revenues jumped to $375 million from $325 million, while Transfer revenues were up 3.8% million to $397 million.

Balance Sheet & Cash Flow

Cash and cash equivalents at the quarter end were $35 million, while long-term debt (excluding current portion) was $8,495 million. Net cash from operating activities for the quarter was $856 million compared with $758 million witnessed in the prior-year period. Capital expenditures were $350 million, up from $333 million in the year-ago period.

Free cash flow was $512 million in the third quarter compared with $433 million reported in the year-earlier quarter. During the quarter, the company returned $185 million to its shareholders through dividend payments and repurchased $500 million worth of shares.

2017 Guidance Affirmed

Buoyed by the strong yield, volume and cost performance, the company raised its guidance for 2017 and now expects adjusted earnings in the range of $3.19-$3.21 per share, up from earlier expectations of $3.14-$3.18 per share.

Free cash flow is expected to be between $1.7 billion and $1.75 billion, up from $1.5 billion and $1.6 billion.

Zacks Rank & Stocks to Consider

Waste Management currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same space include Barnes Group Inc. B, IDEX Corporation IEX and Altra Industrial Motion Corp. AIMC. While Barnes Group sports a Zacks Rank of 1 (Strong Buy), IDEX and Altra Industrial carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Barnes Group has a solid earnings surprise history for the trailing four quarters, having beaten estimates each time for an average of 11.6%.

IDEX Corporation also has a decent earnings surprise history, with an average beat of 4.4% over the trailing four quarters, beating estimates each time.

Altra Industrial generated four strong beats during the same time frame, for an average positive surprise of 17.3%.

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