Waste Connections (WCN) Down 0.4% Since Last Earnings Report: Can It Recover?

It’s been a month since Waste Connections’ (WCN) last earnings report. Shares lost about 0.4% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or will Waste Connections see a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the key drivers.

Waste Connections Beats First Quarter Earnings

Waste Connections, Inc. reported solid first-quarter 2024 results, in which earnings and revenues exceeded the Zacks Consensus Estimate.

Waste Connections’ adjusted earnings (excluding 15 cents from non-recurring items) of $1 per share exceeded the Zacks Consensus Estimate by 2% and increased 16.9% year over year. Revenue of $2.1 billion beat the consensus estimate by 1% and increased 9.1% from the year-ago quarter.

Segment revenues

Solid Waste Collection segment revenues increased 5.6% year-over-year to $1.5 billion, in line with our estimates. Solid Waste Disposal and Transfer segment revenue increased 6.2% from the prior-year quarter to $655.4 million and exceeded our estimate of $404.9 million.

Solid Waste Recycling segment revenues increased 56.6% year-over-year to $49 million. This figure exceeded our estimate of $36.8 million. Intermodal and Other segment revenues increased 29.6% compared to the same quarter last year to USD 49.5 million, which exceeded our estimate of USD 33.2 million.

E&P Waste Processing, Recovery and Disposal segment revenues increased 88.2% from the prior-year quarter to $97.4 million, exceeding our estimate of $56.8 million.

Operational results

Adjusted EBITDA for the reported quarter was $566.9 million, down 12.9% compared to the same quarter last year. Adjusted EBITDA margin was 29.8%, down 160 basis points from the prior-year quarter.

Operating income amounted to USD 314.7 million and was lower than a year ago, when it amounted to USD 366.8 million. Operating margin was 16.6%, compared to 17.7% recorded a year earlier.

Balance sheet and cash flow

Waste Connections ended the first quarter of 2024 with cash and cash equivalents of $78.4 million, compared to $78.6 million at the end of the prior quarter. Long-term debt was $6.7 billion, up from $6.9 billion at the end of the previous quarter.

WCN generated $442.4 million in cash from operations in the reported quarter. Adjusted free cash flow was $274 million. Capital expenditure amounted to USD 175.8 million. The company paid $65.8 million in dividends this quarter.

Prospects for the second quarter

Second-quarter 2024 revenues are estimated at $2.200-$2.225 billion. Net income is expected to be in the range of $263-268 million, with adjusted EBITDA estimated at $715-723 million.

How have estimates changed since then?

Investors have witnessed a downward trend in estimate revisions over the last month.

VGM results

At this point, Waste Connections has a solid Growth Score of B, although it lags slightly behind its Momentum Score of C. Following the exact same trajectory, the stock is rated a C on the value side, meaning it’s in the mid-20 % for this investment strategy.

Overall, the stock has a composite VGM score of B. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. Notably, Waste Connections carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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