Waste Management (WM, Financial) reported first-quarter fiscal 2018 results recently with adjusted earnings of $0.91 per share, ahead of consensus estimate of $0.82 per share. The company generated strong earnings that increased 35.8% compared with the same period last year. It also reported impressive growth in income from operations of nearly 9% that boosted operating cash by 12%.Ă‚
Into the numbers
Waste Management generated revenues of $3.5 billion, missing analysts’ estimate of $3.6 billion. However, it was a favorably growth from last year’s figure of $3.44 billion.
Revenue growth was led by solid yield and volume in the collection and disposal segment. This business brought $160 million of incremental value. However, it was partially compensated by a drop in the recycling line of business, which declined $77 million from last year. Core price came in at 4.9%, relative to 5.1% reported last year 's same quarter and 4.8% in the final quarter of fiscal 2017.
Collection and disposal operations registered internal revenue growth of 2.3% compared with 2.0% a year ago. The conventional solid waste internal revenue rise came in 3.0% from volume growth during the quarter. Total internal revenue improvement from volume, including the recycling and other ancillary units, stood at 2.6%.
The company earned net income of $396 million, which translates to $0.91 per share. Last year same quarter, Waste Management recorded $298 million in net income, or $0.67 per share.
Operational performance and financial position
Total operating expenses were 62.2% as a percentage of revenue, leading to a gross margin of 37.8% in the first quarter of 2018. Last year, Waste Management’s operating expenses were 63.0% of revenue.
The company’s SG&A expenses stood at 10.6% as a percentage of revenue in the quarter compared with 11.3% a year ago. Operating earnings before interest, taxes, depreciation and amortization for the period came in at $955 million, up $69 million or 7.8%, from last year comparable period.
Free cash flow came in at $423 million in the quarter. That compares with $397 million reported a year earlier. The company gave $206 million in dividends and $250 million through share repurchase to its investors during the period. In addition, Waste Management acquired traditional solid waste businesses by spending around $248 million.
CEO Jim Fish said in a statement:
“We delivered strong operating and financial results in the first quarter. We saw organic revenue growth of 6% in our collection and disposal business, which drove the almost 8% increase in the Company’s operating EBITDA for the quarter”
Looking ahead
Fish also expressed satisfaction with the operational performance, which helped the company record robust net cash flow from operating activities and an impressive free cash flow. This enabled Waste Management to reward $456 million to its shareholders through dividends and share buyback, while spending $248 million on conventional acquisitions of similar businesses.
Fish stays confident regarding the prospects of the company with the traditional solid waste business doing well, and helping the company achieve solid results despite external market challenges in the recycling line.
Overall, Waste Management has had a good start to the year. With its strong strategic plans, great commitment and focus even in the face of a difficult recycling environment, the company looks poised for growth. Company remains on track to achieve its full-year 2018 guidance with adjusted earnings per diluted share to come in the range of $3.97 to $4.05 and free cash flow between $1.95 and $2.05 billion.
Waste Management stays assured to deliver healthy performance and remains focused on “delivering exceptional customer service, growing profitable volumes, and improving our cost structure to produce another successful year,” Fish said.
Disclosure: I do not hold any position in the stock mentioned in this article.
