With a look back on the past year and an eye on the one ahead, Waste Management and Waste Connections announced their earnings for the fourth quarter of 2017 in positive terms, with both companies exceeding the revenue expectations they had previously set.

Both companies discussed the impact of the recent tax reform legislation as well as China’s National Sword policy. Additionally, both companies shared expectations they had for the year of 2018, which included the continuation of a strong market for acquisitions.

Waste Management Announces Fourth Quarter Revenues of $3.65B

Houston-based Waste Management announced revenues for the fourth quarter of $3.65 billion, compared with $3.46 billion for the prior year period.

“2017 was arguably the greatest year we’ve seen,” said Jim Fish, president and CEO of Waste Management, in a conference call with investors.

Net income for the fourth quarter was $903 million, or $2.06 per diluted share, as compared to $335 million, or $0.75 per diluted share, for the prior year period. On an as-adjusted basis, earnings per diluted share were $0.85 for the fourth quarter of 2017, as compared to $0.75 for prior year period.

“The strong results that we saw through the first nine months of 2017 continued into the fourth quarter as we saw organic revenue growth continue to translate into operating EBITDA growth,” said Fish in a conference call with investors. “In the fourth quarter, we achieved double-digit growth in income from operations, operating EBITDA and adjusted earnings per diluted share, and nearly 10 percent growth in both adjusted income from operations and operating EBITDA.”

Operating EBITDA was $1.05 billion for the fourth quarter of 2017 and $4.01 billion for the full year. On an as-adjusted basis, operating EBITDA was $1.02 billion for the fourth quarter of 2017, an increase of $90 million, or 9.7 percent, from the fourth quarter of 2016. On an as-adjusted basis, full-year operating EBITDA was $4.0 billion in 2017, an increase of 8.1 percent when compared with 2016.

Operating expenses as a percentage of revenue in the company’s traditional solid waste business improved about 120 basis points during the fourth quarter and 85 basis points for the full year. As a percent of revenue, total company operating expenses were 62.0 percent in the fourth quarter of 2017, as compared to 62.1 percent in the fourth quarter of 2016. For the full year, as a percent of revenue, operating expenses were 62.3 percent in 2017, as compared to 62.4 percent for the full year 2016.

For the full year 2017, Waste Management reported revenues of $14.5 billion, compared with $13.6 billion for 2016. Earnings per diluted share were $4.41 for the full year 2017, compared with $2.65 for the full year 2016. On an as-adjusted basis, earnings per diluted share were $3.22 for the full year 2017, compared with $2.91 for the full year 2016.

“Looking at the full year, 2017 was exceptional for Waste Management as our continued focus on improving core price, adding profitable volume in a disciplined manner and controlling costs led to arguably the best year in the company’s history,” said Fish in a conference call with investors. “Our employees did a great job of executing our strategy, and we exceeded our expectations for all financial and operational metrics leading to record cash provided by operations and adjusted earnings per diluted share.”

For the year of 2018, Fish was optimistic, although he emphasized a small sample size. “We’re encouraged by what we saw in the month of January,” said Fish.

Other highlights from the firm’s performance:

Waste Connections Reports $1.157B in Fourth Quarter Revenue

Toronto-based Waste Connections, Inc. posted revenue in the fourth quarter of $1.157 billion, up from $1.049 billion in the prior year period. This exceeded the outlook for the period by roughly $38 million.

Net income attributable to Waste Connections in the fourth quarter was $315.1 million, or $1.19 per share on a diluted basis of 264.4 million shares. This compares to $85.6 million in net income attributable to Waste Connections, or $0.32 per share on a diluted basis of 263.9 million shares, in the prior year period.

Operating income, which included $15.2 million of impairments relating primarily to the termination of a back-up landfill development project and $7 million in acquisition-related costs, was $175 million. This compares to $139.2 million in the prior year period, which included $23 million in impairments and other operating items along with $16 million in acquisition-related costs.

Revenue for the full year of 2017 was $4.63 billion, up from $3.376 billion in 2016.

Operating income for 2017, which included $189.2 million of expenses primarily related to both goodwill impairment against the company’s E&P segment resulting from the early adoption of FASB’s recent accounting pronouncement simplifying the test for goodwill impairment, and impairments and other operating items mostly related to the divestiture or expected divestiture of certain assets acquired in the Progressive Waste acquisition, was $627.1 million. This compares to operating income of $452.3 million in the prior year, which included $146.0 million of expenses primarily related to the Progressive Waste acquisition and the expected divestiture of certain assets acquired in the Progressive Waste acquisition.

 “Q4 capped off another exceptional year for Waste Connections, with better-than-expected solid waste volume growth and E&P waste activity once again driving financial results in the quarter above expectations,” said Ronald J. Mittelstaedt, chairman and CEO of Waste Connections, in a conference call with investors. “Adjusted free cash flow for the full year of approximately $764 million, or 16.5 percent of revenue and 52.3 percent of adjusted EBITDA, continues to reflect the benefits of our differentiated strategy and purposeful focus on both quality of revenue and free cash flow generation. We are extremely pleased that adjusted free cash flow per share increased more than 20 percent in 2017, while the number of safety-related incidents in the year declined more than 20 percent.”

“Recently completed acquisitions with total annualized revenue of approximately $70 million provide a strong start to what could be another year of above average acquisition activity. In early 2018, we acquired Bay Disposal, LLC and Hampton Roads Recovery Center, LLC (“Bay Disposal & Recycling”). Bay Disposal & Recycling is an integrated provider of solid waste collection, recycling, transfer and disposal services to almost 70,000 customers in southeastern Virginia and northeastern North Carolina through four collection operations, five recycling facilities, one transfer station and a C&D landfill,” said Mittelstaedt in a conference call with investors. “We’ve also completed tuck-in acquisitions in New York and Texas. Our strong financial profile provides us the flexibility to fund this potential above average amount of acquisition activity while continuing to increase the return of capital to shareholders.”

Looking forward to 2018, Waste Connections expects revenue between $1.13 and $1.135 billion for the first quarter and $4.825 billion for the full year. “Each year brings new challenges and growth opportunities, and 2018 will be no different,” said Mittelstaedt.

Other highlights from the firm’s performance: