Waste Management (WM) Up 6.5% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Waste Management (WM). Shares have added about 6.5% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Waste Management due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Waste Management's Q1 Earnings Meet Estimates

Waste Management's first-quarter 2020 earnings came in line with the Zacks Consensus Estimate while revenues surpassed the same.

Adjusted earnings per share of 93 cents were down 1.1% year over year. Total revenues of $3.73 billion beat the consensus estimate by 0.1% and increased 0.9% year over year, backed by yield and volume growth in the company’s collection and disposal business, which contributed $74 million of incremental revenues.
 

Quarterly Numbers in Detail

The Collection segment recorded revenues of $2.52 billion, up 2.6% from the prior-year quarter’s figure. Landfill segment’s top line increased 2.6% year over year to $887 million. Total revenues in the Transfer segment were up 7% to $441 million. Recycling segment revenues declined 12.7% to $254 million. Other businesses’ revenues totaled $430 million, down 0.2% year over year.

Adjusted operating EBITDA of $1.01 billion increased 2.6% from the year-ago quarter’s level. Adjusted operating EBITDA margin rose to 27.2% from 26.7% in the prior-year quarter.

Operating income came in at $573 million compared with $621 million in the year-ago quarter. Operating income margin decreased to 15.4% from 16.8% in the year-ago quarter.

Waste Management exited first-quarter 2020 with cash and cash equivalents of $3.13 billion compared with $3.56 billion at the end of the prior quarter. Long-term debt was $13.1 billion compared with $13.3 billion at the end of the prior quarter.

The company generated $765 million of cash from operating activities and capital expenditure  million. Free cash flow was $318 million.

The company paid out dividends worth $236 million and repurchased shares worth $402 million in first-quarter 2020.

2020 Guidance

Considering the current uncertainty prevailing in the market due to the coronavirus outbreak, Waste Management suspended its 2020 guidance. The company expects a major decline in 2020 revenues from its planned levels due to the coronavirus outbreak, which will result in  volume declines in its landfill and industrial and commercial collection businesses.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 13.59% due to these changes.

VGM Scores

At this time, Waste Management has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Waste Management has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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