Waste Management Inc. (WM) recorded a decline in profit to $186 million or 39 cents per share in the first quarter of 2011 from $199 million or 41 cents per share (excluding an after-tax charge related to the partial withdrawal from a Teamsters’ underfunded multiemployer pension plan) in the year-ago quarter. The profit was lower than the Zacks Consensus Estimate of 41 cents per share.
Revenues increased 6% to $3.10 billion in the quarter, driven by strong yield in collection and disposal businesses, higher commodity prices and improving recycling volumes. It was higher than the Zacks Consensus Estimate of $3.03 billion.
Internal revenue growth from volume fell 1.7% during the quarter. Meanwhile, internal revenue growth from yield for collection and disposal operations was 2.8%.
Revenues from the company’s Collection business increased marginally by 2% to $2.02 billion, Landfill business rose 3% to $579 million, Transfer business slid 6% to $294 million, Wheelabrator business went up slightly by about 2% to $210 million, Recycling business surged 38% to $370 million and Other business soared 39% to $89 million.
Selling, general and administrative (SG&A) expenses increased by $31 million to $382 million due to increased expenses for growth and cost reduction initiatives as well as information technology upgrades. As a percentage of revenue, SG&A expenses increased to 12.3% from 12.0% in the prior year quarter.
The company’s operating profit increased $15 million to $427 million from $412 million a year ago. This translated into an operating margin of 13.8% versus 14% in the prior year quarter.
Cash and cash equivalents improved to $676 million as of March 31, 2011 from $539 million as of December 31, 2010. Long-term debt amounted to $9.17 billion as of March 31, 2011, translating into a long-term debt-to-capitalization ratio of 59%.
In the quarter, cash flow from operations increased to $600 million from $496 million a year ago. Free cash flow rose 14.2% to $289 million, despite a $61 million increase in capital expenditures to $316 million.
For full year 2011, Waste Management reiterated its guidance to earn $2.24 and $2.30 per share. The company continued to expect capital expenditures in the range of $1.35 billion to $1.45 billion and free cash flow in the range of $1.25 billion and $1.35 billion.
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.
The company 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. It currently maintains a Zacks #3 Rank (Hold) on its stock for the short term and a recommendation of “Neutral” for the long term.
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