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Is Waste Management (WM) Poised to Beat on Q2 Earnings?

Waste Management, Inc. WM is slated to release second-quarter 2017 results before the market opens on Jul 26. In the last reported quarter, the company reported earnings of 66 cents per share, which came in line with the Zacks Consensus Estimate. In the trailing four quarters, Waste Management delivered an average positive earnings surprise of 1.7%, beating estimates twice while missing and matching once. Let’s see how things are shaping up for this announcement.        

Why a Likely Positive Surprise?

Our proven model shows that Waste Managementhas the right combination of the two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is perfectly the case here as you will see below:

Zacks ESP: Waste Managementhas an Earnings ESP of +1.22%, as the Most Accurate estimate of 83 cents is pegged above the Zacks Consensus Estimate of 82 cents.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Waste Management, Inc: Price and EPS Surprise

Zacks Rank: Waste Management carries a Zacks Rank #2, which when combined with a positive ESP, makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

On the other hand, we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Factors Driving the Better Than-Expected Earnings

In the last three months, Waste Management’s shares have returned 1.54%, outperforming the industry’s gain of 1.00%.

Waste Management expects to deliver sustainable increase in earnings and free cash flow, driven by the benefits of strategic acquisitions. The acquisition of Deffenbaugh Disposal will help the company to replace revenues lost from the divesture of Wheelabrator. At the same time, the transaction is expected to enable the company to extend its geographic footprint and make a foray in the attractive market of Kansas City, where it has limited presence. A steady stream of such accretive acquisitions is likely to drive the company’s earnings in the future.

The company focuses on improving customer retention by providing better service and higher value solutions. Waste Management emphasizes technology as a strategic pillar for its long-term success. The company expects to develop technological solutions to improve customer interaction and service quality. As part of the initiative, the company has rolled out for its customers.

At the same time, Waste Management is undertaking several steps to further boost its margins. With strong yield, volume and cost performance, the company has reaffirmed its bullish guidance for 2017. The company continues to expect 2017 adjusted earnings in the range of $3.14 to $3.18 per share. On healthy growth dynamics, we also expect the company to report solid second-quarter earnings with year-over-year improvement of 10.3% on 6.3% higher revenues.

Other Key Stocks

Here are some stocks within the Business Services sector that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat:

Exponent, Inc. EXPO, with an Earnings ESP of +4.76% and a Zacks Rank #1.

Visa Inc. V, with an Earnings ESP of +1.19% and a Zacks Rank #2.

ManpowerGroup MAN, with an Earnings ESP of +1.16% and a Zacks Rank #2.

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