Waste Connections (WCN) Beats On Q2 Earnings, Guides Up

Waste Connections Inc. (NYSE:WCN) reported better-than-expected results in second-quarter 2017.

GAAP earnings came in at 47 cents per share, compared with 13 cents per share in the year-ago period. The company reported net income of $123.7 million compared with $27.5 million in the year-ago quarter. The year-over-year improvement in earnings was primarily due to solid top-line growth.

Quarterly adjusted earnings came in at 55 cents per share, beating the Zacks Consensus Estimate of 53 cents. The bottom line also came in 25% higher than the year-ago tally. The upside was primarily driven by strength in solid waste volumes, E&P waste activity and recycled commodity prices.

Revenues for the reported quarter improved to $1,176.6 million from $727.6 million in the year-ago quarter. The year-over-year rise in revenues was driven by the accretive Progressive Waste acquisition. Revenues exceeded the Zacks Consensus Estimate of around $1,150 million.

Operating income for the reported quarter was $206.9 million compared with $63.5 million in year ago period. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased to $373.6 million from $233.6 million in the year-ago quarter.

Segmental Performance

Solid Waste Collection segment was the highest contributor to total revenue in the quarter at 67.6%. The segment’s revenues increased significantly from $501.2 million in the year-earlier quarter to $794.7 million.

Solid Waste Disposal and Transfer contributed 21.9% to the overall revenues. Quarterly revenues increased to $257.2 million from $160 million in the prior-year quarter. Solid Waste Recycling revenues increased to $41.3 million (3.5% of total revenue) from $16.7 million a year ago.

E&P Waste Treatment, Recovery and Disposal segment recorded revenues of $47.2 million (4%) compared with $27.5 million in the year-ago quarter. Finally, Intermodal and Other contributed 3% to total revenue and increased to $35.1 million from $22.2 million in the prior-year quarter.

Balance Sheet and Cash Flow

Waste Connections had cash and cash equivalents of $399.7 million as of Jun 30, 2017. Cash from operating activities was $551.9 million for the first half of 2017 compared with $259.6 million recorded in the year-ago period. Capital expenditures for property and equipment for the reported quarter totaled $111.4 million compared with $55.5 million in the year-ago period.

The strong free cash flow profile following the Progressive Waste acquisition has enabled Waste Connections to maintain a healthy dividend payout for shareholders. This financial strength and flexibility, together with expanded footprint following the acquisition, will likely facilitate the company to better execute its long-term growth strategy, while increasing shareholder returns.

2017 Guidance

Waste Connections expects revenues of approximately $4.57 billion compared with its previous guidance of approximately $4.450 billion. The company expects adjusted EBITDA of about $1.45 billion, while adjusted free cash flow is expected to be approximately $750 million.

Waste Connections, Inc. Price, Consensus and EPS Surprise

Waste Connections, Inc. Price, Consensus and EPS Surprise | Waste Connections, Inc. Quote

Waste Connections currently has a Zacks Rank #3 (Hold). It pulled off an average positive earnings surprise of 7.84% in the last four quarters. A few better-ranked stocks in the same space are listed below:

Exponent, Inc. (NASDAQ:EXPO) , carries a Zacks Rank #1 (Strong Buy) and delivered an average positive earnings surprise of 10.14% in the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fiserv, Inc. (NASDAQ:FISV) carries a Zacks Rank #2 (Buy) at present and delivered an average positive earnings surprise of 1.70% in the last four quarters.

Waste Management, Inc. (NYSE:WM) carries a Zacks Rank #2 (Buy) at present and came up with an average positive earnings surprise of 1.66% in the last four quarters.

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