Waste Management Inc.
) reported earnings per share (EPS) of 61 cents (excluding
special items) in the third quarter of 2012, down 3% from the
year-ago quarter but a penny ahead of the Zacks Consensus
Estimate. The year-over-year fall was due to a decline in
recycling commodity prices in the quarter.
Including asset impairment of 8 cents and restructuring
charges of 8 cents per share and a charge of 1 cent per share
related to a labor dispute, EPS in the quarter stood at 46 cents,
a 21% drop from the year-ago EPS of 58 cents.
Quarter in Detail
Revenues decreased 2% to $3.461 billion from $3.522 billion in
the year-ago quarter, missing the Zacks Consensus Estimate of
$3.512 billion. Work-day adjusted volumes inched up 0.5% for the
quarter. Internal revenue growth from yield for collection and
disposal operations was 0.8%.
Revenues from the company's Collection business dipped 1.4% to
$2.1 billion. Landfill revenues edged up 2% to $705 million,
Transfer revenues declined 1% to $332 million, Wheelabrator
revenues fell 4% to $218 million and Recycling revenues went down
28% to $316 million.
Operating expenses improved 1% to $2.22 billion, as reductions
in commodity rebates and landfill operating costs helped offset
higher expenses for third party haulers and maintenance. Selling,
general and administrative expenses increased 12% year over year
to $335 million. The company's adjusted operating profit remained
flat annually at $575 million. Operating margin expanded 30 basis
points from the prior-year quarter to 16.6%.
Cash and cash equivalents increased to $398 million as of
September 30, 2012 from $237 million as of June 30, 2012.
Long-term debt increased to $9.17 billion as of September 30,
2012, from $8.97 billion as of June 30, 2012. The
debt-to-capitalization ratio remained flat at 61.4% as of
September 30, 2012 compared with June 30, 2012.
During the nine months of fiscal 2012, cash flow from
operations increased to $1.72 billion from $1.74 billion in the
comparable year-ago period. Free cash flow for the period
decreased to $614 million from $867 million in the prior-year.
The company returned $164 million to shareholders as dividends in
Waste Management now expects 2012 adjusted EPS between $2.08
and $2.13, down from the previous guidance of $2.15 and $2.20.
The company expects headwinds to the tune of 14 cents per share
from lower commodity prices in fiscal 2012. Free cash flow is
projected between $1.1 billion and $1.2 billion.
For 2013, the company expects commodity prices to remain
relatively stable. Savings from recent restructuring activities
and focus on pricing are expected to deliver improved results in
Waste Management's recent Oakleaf acquisition is expected to
generate a minimum of $80 million in EBITDA on an annualized
basis. The company has reversed the trend of negative volumes by
delivering positive volumes in 2012.
Waste Management has also announced a restructuring plan that
will result in about 100 basis points expansion in margins in
2013. However, lower trending average commodity prices,
electricity prices and a challenging pricing scenario are
expected to remain headwinds for the balance of 2012, affecting
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.
Casella Waste Systems Inc.
). Waste Management currently maintains a Zacks #3 Rank (Hold) on
its stock for the short term.
CASELLA WASTE (CWST): Free Stock Analysis
REPUBLIC SVCS (RSG): Free Stock Analysis
WASTE MGMT-NEW (WM): Free Stock Analysis
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