Waste Management Inc. (WM) posted a 12% increase in profit to $287 million or 60 cents per share in the fourth quarter of 2010 from $257 million or 52 cents per share in the same quarter of 2009 (all excluding special items). The company’s profit exceeded the Zacks Consensus Estimate by 5 cents per share.
The higher profit was driven by the company’s strong internal revenue growth from yield, which offset lower than expected volumes. Internal revenue growth from yield was 2.6% while internal revenue growth from volume was negative 1.8% for the quarter.
Revenues increased by 6% to $3.19 billion in the quarter. Revenue from the company’s Collection business increased marginally by 3% to $2.07 billion, Landfill business rose 4% to $640 million, Transfer business dipped 7% to $313 million, Wheelabrator business went up 7% to $229 million, Recycling business shot up 44% to $333 million and Other business increased 10% to $88 million.
The company’s operating margin improved 280 basis points to 18% from 15% in the fourth quarter of 2009. On an adjusted basis, the operating margin improved 220 basis points to 18.6% during the quarter.
The company’s selling, general and administrative expenses were 11.5% of revenues compared with 12.1% in the prior year quarter. The average recycling commodity prices went up 36% in the quarter from the prior year.
For full year 2010, Waste Management reported a profit of $1.01 billion or $2.09 per share compared with $986 million or $2.00 per share in the prior year (all excluding special items). The profit was higher than the Zacks Consensus Estimate of $2.04 per share. Revenues in the year scaled up 6% to $12.58 billion from $11.79 billion in 2009.
Cash and cash equivalents declined to $539 million as of December 31, 2010 from $1.14 billion in the corresponding period-end of previous year. Long-term debt amounted to $8.91 billion as of the above date. The long-term debt-to-capitalization ratio remained flat at 58.7% compared with 58.5% a year ago.
In 2010, cash flow from operations declined to $2.27 billion from $2.36 billion a year ago. Free cash flow rose to $1.22 billion from $1.21 billion due to a 6% reduction in capital expenditures to $1.10 billion and a 57% increase in proceeds from divestitures of businesses (net of cash divested) and other sales of assets to $44 million.
For 2011, Waste Management anticipates to earn $2.24 and $2.30 per share. Internal revenue growth from yield on the collection and disposal business is expected to be 2.0%, while internal revenue growth from volume is expected to be flat to slightly positive for the year. Capital expenditures are anticipated in the range of $1.35 billion to $1.45 billion. Free cash flow is projected to lie between $1.25 billion and $1.35 billion.
Waste Management, a Zacks #4 Rank (Sell) stock, is the largest provider of comprehensive waste management services in North America. The company provides collection, transfer, recycling and resource recovery, as well as disposal services to nearly 20 million residential, commercial, industrial and municipal customers. It has a network of 390 collection operations, 345 transfer stations, 273 active landfill disposal sites, 16 waste-to-energy plants, 98 recycling plants and 119 beneficial-use landfill gas projects.
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