Waste Management, Inc. (NYSE:WM) rallied nearly 5% on Wednesday after reporting better-than-expected quarterly earnings, helping to reverse a quick slide and sending WM stock to fresh all-time highs.
Known as the largest environmental solutions provider in Northern America, Waste Management is dedicated to the implementation of an eco-friendly future through innovative waste solutions and renewable energy.
Although the future is green for Waste Management, Inc., investors wondered if stiff competition from smaller competitors and fluctuations in commodity and oil prices would contaminate the future of WM stock.
However, Q4 results have helped reclaim investors’ confidence heading into the rest of 2015.
Postive 2015 Outlook
While Waste Management did report fourth-quarter revenues of $3.44 billion that slightly missed the consensus mark, adjusted earnings of 67 cents per share easily beat forecasts for 60 cents.
What really got WM stock holders excited was the announcement that it would be spending $1 billion on new share buybacks, and upping its dividend from $1.50 per share annually to $1.54. That comes on top of the $1.29 billion Waste Management spent on dividends ($693 million) and common stock repurchases ($600 million) for full-year 2014.
Of course, Waste Management has steadily grown dividends since 2004. The most recent increase brought the quarterly dividend to 38.5 cents per share, good for a yield of 2.75%. That compares well to the rest of its small industry — Republic Services, Inc. (NYSE:RSG) also yields 2.75%, and Waste Connections, Inc. (NYSE:WCN) yields a meek 1.1%.
Waste Management intends to spend the $1.94 billion from the divestiture of Wheelabrator Technologies on share repurchases, acquisitions or both. Moreover, Waste Management CEO David Steiner said, “If we use the net proceeds solely to repurchase shares and repay debt, we expect up to two cents accretion to our 2015 diluted earnings per share.”
Operating expenses declined by nearly $100 million during the fourth-quarter — another bonus for anyone hoping WM will put more cash toward dividends and buybacks.
Looking forward, WM expects roughly 10% earnings growth from its solid waste business, plus a healthy continuation of free cash flow. All in all, WM is positioning itself for growth in both earnings and free cash flow through 2016.
With an annual adjusted earnings estimate falling between $2.48 and $2.55 a share (3% higher than the adjusted profit for WM in fiscal 2014), WM currently has higher expectations than Wall Street.
Bottom Line
While WM faces headwinds that may stunt future performance, WM stock has continued to experience growth despite sharp declines in commodity and oil prices. While WM carries on its path to a greener, brighter future, its efforts to improve shareholder value and ensure long-term success will continue to attract buy-and-hold investors.
As of this writing, Anna Rider did not hold a position in any of the aforementioned securities.
