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Waste Management (WM) Tops Q4 Earnings Estimates, View Solid

Zacks

Waste Management, Inc. WM reported strong fourth-quarter 2017 results with healthy year-over-year increase in revenues and earnings.

Adjusted earnings for the quarter were 85 cents per share compared with 75 cents in the year-earlier quarter. The bottom line surpassed the Zacks Consensus Estimate of 83 cents. The year-over-year increase in adjusted earnings was aided by a healthy rise in revenues despite rise in operating expenses. The company reported adjusted earnings of $3.22 per share for full-year 2017 compared with $2.91 in 2016.

Quarter Details

GAAP earnings for the quarter were $903 million or $2.06 per share compared with $335 million or 75 cents per share in the year-ago quarter.

Total revenues came in at $3,652 million compared with $3,460 million in the year-ago quarter. It surpassed the Zacks Consensus Estimate of $3,565 million. The increase was primarily driven by strong yield and volume growth in the Collection and Disposal business. Revenues for 2017 were $14,485 million compared with $13,609 million in 2016.

The Collection segment recorded revenues of $2,352 million, up from $2,224 million in the prior-year quarter. Landfill segment’s top line increased to $883 million from $780 million. Total revenues from the Transfer segment increased to $399 million from $378 million while that from Recycling was $310 million compared with $338 million in the prior-year quarter. Revenues from Other businesses were $433 million compared with $414 million in the fourth quarter of 2016.

Waste Management, Inc. Price, Consensus and EPS Surprise

Margins

Adjusted operating EBITDA was $1,020 million compared with $930 million in the year-earlier quarter. Adjusted operating EBITDA margin was 27.9% for the quarter with margin expansion of 100 basis points.

Balance Sheet and Cash Flow

As of Dec 31, 2017, Waste Management had $22 million in cash and cash equivalents compared with $32 million in the prior-year period. Long-term debt was $8,752 million compared with $8,893 million a year ago. For 2017, the company generated $3,180 million of cash from operating activities compared with $3,006 million in 2016. Free cash flow for the year was $1,770 million compared with $1,710 million in the prior year.

Moving Forward

Concurrent with the earnings release, the company provided its outlook for 2018. It expects internal revenues from collection and disposal business to grow minimum 2% while that from volume are expected lie between 2% and 2.2%. Free cash flow for 2018 is expected to be between $1.95 billion and $2.05 billion. Adjusted earnings are likely to be between $3.97 and $4.05 per share.

Zacks Rank & Other Stocks to Consider

Waste Management has a Zacks Rank #2 (Buy). Other stocks in the industry worth considering include Republic Services, Inc. RSG, Intertek Group plc IKTSY and S&P Global Inc. SPGI each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Republic Services has an expected long-term earnings growth rate of 10.2%. It exceeded estimates in each of the trailing four quarters with an average beat of 5.1%.

Intertek has an expected long-term earnings growth rate of 12%.

S&P Global has an expected long-term earnings growth rate of 12.5%. It exceeded estimates in each of the trailing four quarters with an average beat of 12.8%.

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