Waste Management announced its financial results for the second quarter, which featured year-over-year gains in both revenues and net income, continuing a trend of strengthening financial results among the industry’s publicly-traded companies. Of particular note, the company posted positive commercial collection volumes for the first time since 2005.
Revenues for the second quarter of 2016 were $3.43 billion compared with $3.32 billion for the same 2015 period. Net income for the quarter was $287 million, or $0.64 per diluted share, compared with net income of $274 million, or $0.60 per diluted share, for the second quarter of 2015.
“Our second quarter results mirrored the strong first quarter trends, as we again exceeded our revenue, earnings, and margin targets,” Waste Management President and CEO David P. Steiner said in a statement. “In the second quarter, our revenue continued to see benefits from core price, volumes, and acquisitions.”
The company reported core price of 4.9 percent (up from 4.1 percent in 2015) and traditional solid waste volumes were up 0.8 percent.
“We also continued to make progress in our cost programs, as operating costs as a percent of revenue improved 300 basis points, or 140 basis points on an as-adjusted basis,” Steiner said.
The company also announced a management change with current CFO James C. Fish Jr. being named to the position of president. Fish will retain his existing role as CFO while the company conducts a search to fill that role.
The new CFO will report to Fish, who, according to a press release from Waste Management, “will maintain his responsibility for all financial affairs for Waste Management, including treasury, audit, accounting, financial planning, tax and investor relations. He will also continue to oversee the information technology group and several of the Company’s growth areas, including strategic business development and the Company’s organic growth group.”
In a statement, Steiner said the move is part of an “ongoing focus on succession planning.”
“He is a talented leader with tremendous knowledge of and expertise in all aspects of our business and has an impressive track record of delivering results and driving shareholder value,” Steiner said. “The senior leadership team and I look forward to continuing our work alongside Jim in his added role as President as we execute our strategy to drive profitable growth and create value for our shareholders.”
“I am excited to take on this role and humbled by the confidence David and the Board of Directors have demonstrated in me,” Fish said in a statement. “Our company’s future is bright, our business plan is solid and I look forward to continue working with our field and corporate teams to successfully execute on all aspects of that plan.”
Fish, 54, joined Waste Management in 2001. Prior to becoming CFO, he held several key positions with the company, including senior vice president for the company’s eastern group, area vice president for Pennsylvania and West Virginia, market area general manager for Massachusetts and Rhode Island, vice president of price management and director of financial planning and analysis.
Other key highlights from the company’s earnings report included:
- The company’s $110 million revenue increase was driven by positive yield and volume in the company’s collection and disposal business of $98 million. Acquisitions, net of divestitures, also contributed $52 million of revenue growth. The increases were partially offset by $24 million in lower fuel surcharge revenue, $10 million in foreign currency fluctuations, and $5 million in lower recycling revenues.
- Internal revenue growth from yield for collection and disposal operations was 2.6 percent, up 90 basis points from the second quarter of 2015.
- Traditional solid waste business internal revenue growth from volume was positive 0.8 percent in the second quarter of 2016. Total company internal revenue growth from volume was 0.4 percent in the second quarter, with lower recycling volumes accounting for the 40 basis point difference.
- Average recycling commodity prices increased 2.3 percent in the second quarter of 2016 from the prior year period. Recycling volumes declined 2.9 percent in the second quarter.
- Net cash provided by operating activities was $748 million, compared to $816 million in the second quarter of 2015. The company posted a year-over-year increase in operating EBITDA of $127 million, or $76 million on an as-adjusted basis.
- Capital expenditures for the quarter were $312 million, an increase of $16 million compared to 2015. The Company now expects full-year capital expenditures to be between $1.4 and $1.45 billion, of which about $100 million relates to one-time capital expenditure items.
- Free cash flow was $447 million in the second quarter of 2016. The company now expects its full-year free cash flow to be between $1.6 and $1.7 billion.
- In response to the earnings, Stifel analyst Michael E. Hoffman reiterated a buy rating on the company with a $75 target price for the stock. “Details underlying price and volume trends only reaffirmed the reported results and the measured positive outlook for the 2H and into 2017,” Hoffman wrote. “WM also disabused the idea of a consumer or industrial recession. Their volumes and pipeline of special waste projects belie the likelihood on a recession looming soon. To be clear solid waste growth is low but positive with a bias to the positive not the negative.”