Waste Management Q4 Earnings Beat, Revenue Estimates Miss

Waste Management, Inc (WM - Analyst Report) reported net income of $590 million or $1.28 per share in the fourth quarter of 2014, reviving drastically from net loss of $605 million or loss of $1.29 per share in the year-ago period. The increase in earnings was driven by strong pricing and cost control initiatives.

Full-year 2014 net income per share stood at $2.79 per share versus 21 cents per share in 2013.

Excluding one-time items, adjusted earnings per share (EPS) stood at 67 cents in the reported quarter versus EPS of 56 cents in the year-ago period. The adjusted earnings exceeded the Zacks Consensus Estimate of 61 cents.

Excluding one-time items, adjusted earnings per share (EPS) stood at $2.48 in full year 2014 versus EPS of $2.15 in 2013. For full-year 2014, the adjusted earnings exceeded the Zacks Consensus Estimate of $2.41 per share.

 Quarter in Detail
    
Revenues for the fourth quarter of 2014 stood at $3,437 million versus $3,500 million in the year-ago period. The reported revenues lagged the Zacks Consensus Estimate of $3,502 million. The decline in revenues was related to divestiture of operations and the impact of foreign currency translation.

Revenues for the full-year 2014 stood at $14.00 billion versus $13.98 billion in 2013.

Internal revenue growth from yield (for collection and disposal operations) stood at 2.0% in the reported quarter.

Core price (including price increases and fees, other than the company’s fuel surcharge, net of rollbacks) was 3.9% in the reported quarter.

Internal revenue growth from volume reported a decline of 0.8% in the reported quarter.

Revenues from the company’s Collection business decreased to $2,107 million in the reported quarter from $2,132 million in the year-ago period. Landfill revenues improved marginally by 3.1% to $727 million from $705 million in the prior-year period. Recycling revenues declined to $321 million from $356 million, while Transfer revenues were up by $4 million to $336 million. Wheelabrator revenues were down 16.6% to $176 million.

Operating expenses improved by $97 million in the reported quarter to $2170 million. The savings were driven by reduced costs and other expenses.

Financials

Cash and cash equivalents stood at $1,307 million as of Dec 31, 2014 versus $58 million in Dec 31, 2013.  Long-term debt (less current portion) stood at $8,345 million as of Dec 31, 2014 versus $9,500 million in Dec 31, 2013.

Net cash provided by operations for twelve months ended Dec 31 2014 stood at $2,331 million versus $2,455 million in the prior-year period. Capital expenditure stood at $1,151 million for twelve months ended Dec 31, 2014 versus $1,271 million in the prior-year period.

Free cash flow stood at $3,433 million at Dec 31, 2014 versus $1,322 million in the year-ago period.

For the full year 2014, the company returned $1.29 billion to shareholders, consisting of $693 million in dividends and $600 million in stock repurchases.

Outlook

Waste Management expects adjusted earnings per share in 2015 to be in the range of $2.48 and $2.55 per share, an increase of 8%–11%. Free cash flow is expected to be in the range of $1.4–$1.5 billion. Proceeds from divestitures are expected to be in the range of $50–$100 million.

Internal revenue growth from yield on the collection and disposal business is expected to be 2.0% and internal revenue growth from volume is expected to be between negative 0.5% to flat. Core price is expected to be approximately 3.8%. Capital expenditures are expected to be approximately $1.2–$1.3 billion.

Waste Management intends to increase its dividend by 4 cents to $1.54 per share on an annual basis for approximately $700 million. Also, the company has authorized a share repurchase program of up to $1 billion.

Going forward, Waste Management expects to continue with its pricing and cost efforts. However, the recycling line of business is expected to witness a negative headwind in the range of 3 cents–5 cents per share in 2015.

Waste Management currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look include Huron Consulting Group Inc. (HURN -Snapshot Report) carrying a Zacks Rank #1 (Strong Buy), CBIZ, Inc. (CBZ - Snapshot Report) and Corporate Executive Board Co. (CEB - Snapshot Report), both carrying a Zacks Rank #2 (Buy).