Waste Connections, Inc. (WCN) delivered impressive third-quarter 2023 results, exceeding both earnings and revenue expectations. This outstanding performance has garnered positive attention from investors, resulting in a 1.6% increase in share prices following the earnings release on October 25.
The company reported adjusted earnings of $1.17 per share, surpassing the Zacks Consensus Estimate by 2.6% and demonstrating a 6.4% year-over-year increase. Revenues reached $2.06 billion, beating the consensus estimate by 0.2% and reflecting a solid 9.8% growth compared to the previous year.
Segment Breakdown
Solid Waste Collection:
Waste Connections’ solid waste collection segment experienced an 11% revenue increase, amounting to $1.51 billion. Although it missed our estimate by 0.7%, this growth showcases the company’s strong performance in this key area.
Solid Waste Disposal and Transfer:
The solid waste disposal and transfer segment achieved a revenue increase of 12.7%, reaching $418.3 million. This result exceeded our estimate by 4.2%, indicating the segment’s success.
Solid Waste Recycling:
The solid waste recycling segment faced a year-over-year revenue decline of 42.3% to $35.12 million. This figure fell short of our estimated $45.91 million, reflecting the challenges faced by the recycling industry.
Intermodal and Other:
The intermodal and other segment experienced an 11.2% decrease in revenues, amounting to $44.87 million. This decline warrants further analysis to identify potential factors affecting the segment’s performance.
E&P Waste Treatment, Recovery, and Disposal:
The E&P waste treatment, recovery, and disposal segment achieved a revenue increase of 9.9%, totaling $58.5 million. This result slightly surpassed our estimated $53 million, highlighting the segment’s positive trend.
Operational Highlights
Waste Connections reported adjusted EBITDA of $671.16 million, a significant 11% increase from the previous year. The adjusted EBITDA margin also improved to 32.5% compared to 31.3% in the year-ago quarter. The company’s operating income reached $352.98 million, indicating a 4.4% growth from the prior-year level.
Balance Sheet and Cash Flow
Waste Connections finished the third quarter of 2023 with cash and cash equivalents amounting to $96.19 million. The company’s long-term debt stood at $6.8 billion. In terms of cash flow, Waste Connections generated $554.16 million in cash from operating activities during the quarter, resulting in adjusted free cash flow of $290.6 million. The company also paid $65.67 million in dividends.
Reaffirmed Outlook
Waste Connections reaffirmed its outlook for the full year 2023. The company expects revenues to reach $8.025 billion, slightly below the Zacks Consensus Estimate of $8.02 billion. Net income is projected to be $931 million, with adjusted EBITDA estimated at $2.525 billion. Waste Connections plans to allocate approximately $950 million towards capital expenditures, while net cash provided by operating activities is anticipated to be $2.141 billion.
Waste Connections currently holds a Zacks Rank #3 (Hold).
Comparison to Industry Peers
Waste Connections’ financial performance reflects its competitive position in the industry. Fiserv, Inc. (FI) reported better-than-expected third-quarter 2023 results, with adjusted earnings per share of $1.96 surpassing the consensus estimate by 1%. Similarly, Waste Management, Inc. (WM) achieved adjusted earnings per share of $1.63, beating the Zacks Consensus Estimate by 1.2%. However, Automatic Data Processing, Inc. (ADP) reported mixed first-quarter fiscal 2024 results, with earnings exceeding expectations but revenues falling short.
These results indicate Waste Connections’ promising performance within its industry.
Investment Opportunity
For investors seeking potential opportunities, Waste Connections offers a strong contender in the waste management sector. The company’s solid financials, impressive segment performance, and strategic outlook position it as a favorable investment option.
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Disclosure: The author and Zacks Investment Research have no affiliation with Nasdaq, Inc., and the views expressed in this article are solely those of the author.
