Waste Management Inc
) reported earnings per share (EPS) of 52 cents (excluding special
items) in the first quarter, a 4% increase from the year-ago
quarter and 1 cent short of the Zacks Consensus Estimate.
Improvement in the core collection and disposal business helped
offset lower earnings from the recycling and waste-to-energy
operations and a negative impact from an under-recovery of fuel
Including asset impairment and restructuring charges of 6 cents per
share and a charge of 1 cent per share related to the partial
withdrawal from a Teamsters' multiemployer pension plan, EPS in the
quarter stood at 45 cents, a 10% drop from the year-ago EPS of 50
Quarter in Details
Revenues increased 3.3% to $3.459 billion from $3.347 billion in
the year-ago quarter, missing the Zacks Consensus Estimate of $3.52
billion. Internal revenue growth from volume edged up 0.6% during
the quarter. Internal revenue growth from yield for
collection and disposal operations was 0.6%.
Revenues from the company's Collection business dipped 0.4% to $2.1
billion. Landfill revenues rose 1% to $676 million, Transfer
revenues declined 1% to $331 million, Wheelabrator revenues
declined 9% to $206 million and Recycling went down 12% to $369
Adjusted operating expenses increased 6% to $2.26 billion, mainly
due to an increase in subcontractor costs associated with the
Oakleaf operations and increased labor costs. Selling, general and
administrative expenses improved 2% to $374 million, compared with
the prior-year quarter. The company's adjusted operating profit
decreased 1% to $502 million from $506 million a year ago.
Operating margin likewise contracted 60 basis points to 14.5% from
15.1% in the prior-year quarter.
Cash and cash equivalents increased to $237 million as of June 30,
2012 from $189 million as of March 31, 2012. Long-term debt
marginally decreased to $8.97 billion as of June 30, 2012, from
$8.99 billion as of March 31, 2012. The debt-to-capitalization
ratio increased to 61.4% as of June 30, 2012 compared with 60.3% as
of March 31, 2012.
During the first half of fiscal 2012, cash flow from operations
increased to $1.1 billion from $1.08 billion in the comparable
year-ago period. Free cash flow for the period decreased to $434
million from $495 million in the prior-year quarter. The company
returned $165 million to shareholders as dividends.
Waste Management has also announced a restructuring plan to
reorganize its operations and reduce approximately 100 basis points
of costs in 2013. The company will be eliminating around 700 jobs.
The company expects to record a pre-tax charge in the range of $50
million to $60 million, primarily related to employee separation
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Waste Management expects 2012 adjusted EPS between $2.15 and $2.22.
The company expects headwinds to the tune of 7 cents per share from
recycling and waste-to-energy in the next half of fiscal 2012. Free
cash flow is projected between $1.1 billion and $1.2 billion.
Waste Management's recent Oakleaf acquisition is expected to
generate a minimum of $80 million in EBITDA on an annualized basis.
In addition, the company's ability to cut costs has helped in
maintaining profits despite weak volumes. On an optimistic note,
the company has witnessed positive volumes in its recent two
quarters, for the first time since 2006, reversing its streak of
negative volumes. However, the headwinds include lower trending
recycling prices, electricity prices, and the integration impact of
the Oakleaf acquisition.
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
). Waste Management currently maintains a Zacks #4 Rank (Sell) on
its stock for the short term.