HomeMost PopularInvestingWaste Connections Outperforms Q3 Estimates, Boosting Investor Confidence

Waste Connections Outperforms Q3 Estimates, Boosting Investor Confidence

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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 Connectionsโ€™ 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 companyโ€™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 segmentโ€™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 segmentโ€™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 segmentโ€™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 companyโ€™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 companyโ€™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 Connectionsโ€™ 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 Connectionsโ€™ promising performance within its industry.

Investment Opportunity

For investors seeking potential opportunities, Waste Connections offers a strong contender in the waste management sector. The companyโ€™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.

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