Yield and Volume Gains Fuel Waste Management, Inc. Earnings

By Markets Fool.com

Image Source: Waste Management.

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Waste Management(NYSE: WM) announced first-quarter financial results on April 28. The aptly named provider of waste management services hauled in higher profits as its collection volumes grew on a year-over-year basis for the first time since 2012.

Revenues rose 4.5%, to $3.2 billion, including growth of 1.9% from higher collection volume, 0.5% from average yield, and 3% from acquisitions, partially offset by divestitures (-0.3%) and foreign-exchange movements (-0.6%). In addition, Waste Management's pricing power was again on display in the first quarter, with core price improving 5.3% versus the year-ago period. However, low commodity prices remain troublesome, with average recycling prices down 12% versus Q1 2015.

Operating expenses, as a percent of revenue, declined to 62.8% from 64% in the prior-year period, as Waste Management progressed with its cost-cutting initiatives. That helped net income rise 13.7% (from Q1 2015's adjusted results), to $258 million. And earnings per share, boosted by share buybacks, jumped 18.4%, to $0.58.

Most importantly, Waste Management continues to turn cash into trash for its investors. Operating and free cash flow exceeded$700 millionand$400 million in Q1, and management returned more than $400 million to shareholders in the form of dividends and share repurchases during the quarter.

"We achieved strong first-quarter results and exceeded our internal targets in virtually every metric, including revenue, earnings, margins, and cash flow," said CEO David Steiner in a press release.

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Looking forward
The company expects to "meet or exceed" its full-year 2016 guidance for adjusted EPS in the range of$2.74 to $2.79, and free cash flow of between$1.5 billion and $1.6 billion. With this strong cash-flow generation, and a wide competitive moat built upon a network of irreplaceable landfill assets, Waste Management is well positioned to reward investors with rising dividend payouts and profit-fueled share price appreciation for many years to come.

The article Yield and Volume Gains Fuel Waste Management, Inc. Earnings originally appeared on Fool.com.

Joe Tenebruso has no position in any stocks mentioned. The Motley Fool owns shares of Waste Management. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.