Waste Management (WM) Q3 Earnings Top, Revenues Lag Estimates

Waste Management Inc. (NYSE:WM) reported mixed third-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.

Adjusted earnings per share of $1.19 beat the consensus mark by 3 cents and were higher than the year-ago quarter by 4 cents. Total revenues of $3.96 billion missed the consensus estimate by $31 million but increased 3.8% year over year.

The top line benefited from strong yield and volume growth in the company’s collection and disposal business, which contributed $198 million of incremental revenues.

Internal revenue growth from yield for collection and disposal operations was 2.6% compared with 2.5% in the year-ago quarter. Collection and disposal business internal revenue growth from volume was 3.3% in third-quarter 2019. Total company internal revenue growth from volume, which includes recycling and other ancillary businesses, was 2.6%.

So far this year, shares of Waste Management have gained 31.4% compared with 24% rise of the industry it belongs to and 18.3% rise of the Zacks S&P 500 composite.

Quarterly Numbers in Detail

The Collection segment recorded revenues of $2.63 billion, up 5.6% from the prior-year quarter’s figure. Landfill segment’s top line increased 7.2% year over year to $993 million. Total revenues in the Transfer segment were up 5.8% to $471 million. Recycling segment revenues declined 27.3% to $245 million. Other businesses’ revenues totaled $469 million, up 9.1% year over year.

Adjusted operating EBITDA of $1.14 billion increased 3.1% from the year-ago quarter’s level. Adjusted operating EBITDA margin decreased to 28.8% from 28.9% in the year-ago quarter.

Operating income came in at $734 million compared with $699 million in the year-ago quarter. Operating income margin increased to 18.5% from 18.3% in the year-ago quarter.

Waste Management exited third-quarter 2019 with cash and cash equivalents of $2.92 billion compared with $2.25 billion at the end of the prior quarter. Long-term debt was $13.15 billion compared with $12.62 billion at the end of the prior quarter.

The company generated $953 million of cash from operating activities and capital expenditure was $483 million. Free cash flow was $478 million compared with $480 million in the prior-year quarter.

The company paid out dividends worth $218 million in third-quarter 2019. It spent $76 million on acquisitionsof traditional solid waste businesses during the reported quarter.

2019 Guidance

Waste Management reaffirmed its full-year 2019 guidance. The company continues to expect adjusted EPS in the range of $4.28-$4.38. Thecurrent Zacks Consensus Estimate of $4.32 lies within the guided range.

Adjusted operating EBITDA is expected in the range of $4.40-$4.45 billion. Free cash flow is anticipated between $2.025 and $2.075 billion.

Zacks Rank & Upcoming Releases

Currently, Waste Management carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Zacks Business Services sector are awaiting third-quarter 2019 earnings results from key players like Clean Harbors (NYSE:CLH) , Aptiv (NYSE:APTV) and Republic Services (NYSE:RSG) , each scheduled to release on Oct 30.

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