Why Waste Management Stock Went Up on the Market's Down Day

Shares of Waste Management (NYSE: WM) went up on Tuesday, even though the market was down sharply. As of 1 p.m. ET, Waste Management stock was up 5.4%, compared with the nearly 1.4% drop for the S&P 500 -- relatively large moves for both.

The reason? The company just beat analyst expectations during its most recent quarter.

Another great garbage quarter for Waste Management

In the fourth quarter of 2023, Waste Management generated revenue of $5.2 billion, which was an all-time high and up nearly 6% from the prior-year period. The company generates much of its revenue from garbage collecting and recycling, which isn't necessarily high growth. But it is consistent.

Waste Management's Q4 operating income was up less than 3% year over year, and diluted earnings per share (EPS) were up less than 1%. Ideally, these profit metrics would improve at a faster rate than revenue.

However, investors are overlooking this because Waste Management is investing in its business. And these investments will pay off in 2024 and beyond.

The trashy future

Waste Management is in the middle of a multiyear journey spending billions in capital expenditures to grow its energy business. The company is harvesting gas from landfills to fuel vehicles and to sell, which will boost profits over the long haul. It intends to spend $850 million to $900 million on building this infrastructure in 2024 alone, which temporarily will weigh down free cash flow.

However, its energy business is partly why Waste Management expects to grow revenue by 6% to 7% in 2024. Over time, these investments will allow it to grow its cash flow, supporting the ongoing growth of its dividend, among other things.

On that note, Waste Management intends to increase its dividend for the 21st consecutive year in March. And with the company's ongoing revenue growth and profit-boosting moves, income investors can expect dividend increases for many years to come.

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Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends Waste Management. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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