Waste Management Inc. (WM) recorded a 15% increase in EPS to 63 cents (excluding special items) in the third quarter from 55 cents in the year-ago quarter primarily driven by pricing programs, higher commodity prices and recycling volumes, acquisitions and fuel surcharges and cost reduction initiatives. The company outperformed the Zacks Consensus Estimate of 61 cents.

Revenues increased 9% to $3.52 billion from $3.23 billion in the year-ago quarter, higher than the Zacks Consensus Estimate of $3.42 billion. Internal revenue growth from volume fell 2% during the quarter. Meanwhile, internal revenue growth from yield for collection and disposal operations was 1.6%.

Revenues from the company’s Collection business increased marginally by 1% to $2.15 billion, Landfill business rose 2% to $690 million, Transfer business dipped 1% to $337 million, Wheelabrator business declined 4% to $228 million, Recycling business increased an impressive 53% to $438 million and Other business doubled to $210 million.

Adjusted operating expenses increased by 9% to $2.16 billion due to increased cost of goods sold from recycling commodity rebates and increase in fuel costs. Adjusted selling, general and administrative expenses remained flat at $368 million compared to the prior year quarter. The company’s operating profit increased 4% to $564 million with operating margin of 16% versus 16.8% in the prior year quarter.

Cash and cash equivalents deteriorated to $282 million as of September 30, 2011 from $371 million as of June 30, 2011. Long-term debt amounted to $9.6 billion as of September 30, 2011 with debt-to-total capital ratio of 60.5% compared with $9.04 billion .and 57.7% as of June 30, 2011, respectively.

In the first nine months of 2011, cash flow from operations increased to $1.74 billion from $1.65 billion in the comparable year ago period. Free cash flow decreased to $372 million in the quarter from $424 million in the year-ago period. The company returned $518 million to shareholders, consisting of $158 million in dividends and $360 million in common stock repurchases.

For full year 2011, Waste Management maintained its EPS guidance of $2.14-$2.18. The company expects free cash flow of $1.25 billion for the year.

Waste Management 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 competes with Republic Services, Inc. (RSG) and Casella Waste Systems Inc. (CWST). Waste Management currently maintains a Zacks #3 Rank (Hold) on its stock for the short term.

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