Waste Management Misses by an Inch - Analyst Blog
27 April 2012 - 1:22AM
Zacks
Waste Management
Inc. (WM) reported earnings per share (EPS) of 38 cents
(excluding special items) in the first quarter, a penny below the
year-ago quarter and two cents short of the Zacks Consensus
Estimate.
Quarterly results suffered from
lower commodity prices at its recycling operations (3 cents),
higher fuel prices (1 cent) and a dilutive impact from its
waste-to-energy operations (2 cents).
Including after-tax restructuring
charges and integration costs related to the Oakleaf acquisition,
EPS in the quarter stood at 37 cents, a 5% drop from the year-ago
EPS of 39 cents.
Quarter in
Details
Revenues increased 6% to $3.395
billion from $3.103 billion in the year-ago quarter, marginally
higher than the Zacks Consensus Estimate of $3.227 billion.
Internal revenue growth from volume edged up 1.3% during the
quarter, the first time since 2006. Internal revenue growth
from yield for collection and disposal operations was 0.9%.
Revenues from the company’s
Collection business increased 3% to $2.1 billion. Landfill revenues
rose 6% to $615 million, Transfer revenues dipped 5% to $298
million, Wheelabrator revenues declined 3% to $207 million and
Recycling went down 2% to $345 million.
Adjusted operating expenses
increased 9% to $2.16 billion, mainly due to an increase in
subcontractor costs associated with the Oakleaf operations and
increased labor costs. Selling, general and administrative expenses
increased 7% to $407 million, compared with the prior-year quarter,
again due to the company’s acquisition of Oakleaf, as well as the
costs incurred for implementation of cost-saving and sales and
marketing initiatives. The company’s adjusted operating profit
decreased 5% to $405 million from $427 million a year ago.
Operating margin likewise contracted 12.3% from 13.8% in the
prior-year quarter.
Financials
Cash and cash equivalents
deteriorated to $189 million as of March 31, 2012 from $258 million
as of December 31, 2011. Long-term debt marginally decreased to
$8.99 billion as of March 31, 2012, compared with $9.1 billion as
of December 31, 2011. The debt-to-capitalization ratio was 60.3% as
of March 31, 2012, flat from fiscal 2011 end.
During the quarter, cash flow from
operations decreased to $475 million from $600 million in the
comparable year-ago period. Free cash flow decreased to $102
million in the quarter from $289 million in the prior-year quarter.
The company returned $164 million to shareholders as dividends.
Outlook
Waste Management expects 2012
adjusted EPS between $2.22 and $2.30. The company expects recycling
and waste-to-energy commodity prices to affect the second quarter,
but to moderate in the latter half of the year. The company has
factored in benefits from improved pricing, a seasonal pick-up in
volumes, procurement and other savings, and the full integration of
its acquired Oakleaf operations in the guidance. Free cash flow is
projected between $1.1 billion and $1.2 billion.
Waste Management’s recent Oakleaf
acquisition is expected to generate a minimum of $80 million in
EBITDA on an annualized basis. In addition, the company’s ability
to cut costs has helped in maintaining profits despite weak
volumes. On a positive note, the company has reversed its trend of
negative volumes in the quarter. However, the headwinds include
lower trending recycling prices, electricity prices, pressure on
pricing, and the integration impact of the Oakleaf acquisition.
Waste Management is the largest
provider of comprehensive waste management services in North
America. The company provides collection, transfer, recycling and
resource recovery, as well as disposal services, to nearly 20
million residential, commercial, industrial and municipal
customers. It competes with Republic Services,
Inc. (RSG) and Casella Waste Systems Inc.
(CWST). Waste Management currently maintains a Zacks #4 Rank (Sell)
on its stock for the short term.
CASELLA WASTE (CWST): Free Stock Analysis Report
REPUBLIC SVCS (RSG): Free Stock Analysis Report
WASTE MGMT-NEW (WM): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Casella Waste Systems (NASDAQ:CWST)
Historical Stock Chart
From Jun 2024 to Jul 2024
Casella Waste Systems (NASDAQ:CWST)
Historical Stock Chart
From Jul 2023 to Jul 2024