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Waste Management (WM) Q4 Earnings: What’s in the Cards?

Zacks

Waste Management, Inc. WM is scheduled to report fourth-quarter 2017 results before the opening bell on Feb 15. Last quarter, adjusted earnings beat the Zacks Consensus Estimate by 2 cents.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Waste Management is executing well its initiatives to refocus on the core business activities and instill price and cost discipline to achieve better margins. The company aims to focus on improving customer retention by providing better service and higher value solutions.

Since its acquisition of Deffenbaugh Disposal in 2015, the company has extended its geographical footprint and emerged with a stronger financial profile. Waste Management has also acquired Keep It Clean, a local disposal firm, during the quarter. The company’s steady stream of accretive acquisitions is likely to drive earnings. It has also reported better-than-expected revenues in the trailing six quarters. The Zacks Consensus Estimate for Waste Management’s fourth-quarter revenues is pegged at $3,565 million, slightly higher than reported revenues of $3,460 million in the prior-year quarter.

Moreover, the company's successful cost-reduction initiatives have helped it in accomplishing remarkable gross margin expansion and EBITDA growth over the quarters. It is undertaking several steps to further boost its margins, which are likely to be reflected in the to-be-reported quarter.

However, the company expects volumes to be down due to lower national counts as it strives for improved margin growth and pricing. The pricing environment also remains challenging and highly competitive due to aggressive bidding by smaller competitors. Waste Management needs to improve margins on the recycling side through adjustment of rebates to reflect lower pricing and also needs to improve the quality of inbound material to increase profitability. Decline in average recycling commodity prices and recycling volumes also remain headwinds.

Earnings Whispers

Our proven model does not conclusively show that Waste Management is likely to beat earnings this quarter as it does not possess the key components. 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 not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% with both pegged at 83 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 has a Zacks Rank #2. While this increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Agilent Technologies, Inc. A has an Earnings ESP of +1.21% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aaron's, Inc. AAN has an Earnings ESP of +3.81% and a Zacks Rank #2.

Atlas Air Worldwide Holdings, Inc. AAWW has an Earnings ESP of +0.48% and a Zacks Rank #2.

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