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Zacks Equity Research, On Friday July 29, 2011, 4:08 pm EDT
Waste Management Inc. (NYSE: WM – News) recorded an increase in profit to 54 cents per share (excluding special items) in the second quarter of the year from 51 cents per share in the year-ago quarter. With this, the company has missed the Zacks Consensus Estimate by a penny.
Revenues increased 6% to $ 3.35 billion from $ 3.16 billion in the year-ago quarter, driven by higher commodity prices, improving recycling volumes, and collection and disposal yield. It was higher than the Zacks Consensus Estimate of $ 3.32 billion.
Internal revenue growth from volume fell 1.7% during the quarter. Meanwhile, internal revenue growth from yield for collection and disposal operations was 1.6%.
Revenues from the company’s Collection business increased marginally by 1.6% to $ 2.12 billion, Landfill business rose slightly by 1.1% to $ 671 million, Transfer business dipped 4.8% to $ 334 million, Wheelabrator business went up 4.1% to $ 226 million, Recycling business soared 49% to $ 419 million and Other business surged 38% to $ 105 million.
Selling, general and administrative expenses increased by $ 37 million to $ 382 million from $ 345 million a year ago driven by increased expenses for growth initiatives, cost reduction programs and information technology upgrades. As a percentage of revenue, SG&A expenses increased to 11.4% from 10.9% in the prior year period.
The company’s operating profit decreased $ 80 million to $ 506 million from $ 586 million a year ago. This translated into an operating margin of 15.1% versus 18.6% in the prior year quarter.
Cash and cash equivalents deteriorated to $ 371 million as of June 30, 2011 from $ 539 million as of December 31, 2010. Long-term debt amounted to $ 9.04 billion as June 30, 2011, translating into a long-term debt-to-capitalization ratio of 59%.
In the first half of 2011, cash flow from operations increased to $ 1.08 billion from $ 976 million a year ago. Free cash flow decreased to $ 495 million from $ 528 million in the year-ago period, due to an increase in capital expenditures to $ 596 million from $ 475 million a year ago.
For full year 2011, Waste Management lowered its EPS guidance to $ 2.14 and $ 2.18 compared with its previous outlook of $ 2.24 and $ 2.30 per share. The company expects capital expenditures to be $ 1.40 billion and free cash flow of $ 1.25 billion for the year.
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. (NYSE: RSG – News) and Casella Waste Systems Inc. (NasdaqGS: CWST – News).
The company has a network of 390 collection operations, 345 transfer stations, 273 active landfill disposal sites, 16 waste-to-energy plants, 98 recycling plants and 119 beneficial-use landfill gas projects. It currently maintains a Zacks #3 Rank (Hold) on its stock for the short term and a recommendation of Neutral for the long term.
(We are reissuing this article to correct a mistake. The original article should no longer be relied upon.)
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