Integrated waste services provider Waste Management, Inc. (WM) reported Thursday a 10.6% year-over-year decline in profit for the third quarter, as falling revenues on lower volumes offset higher prices and cost cutting actions.
Adjusted earnings per share for the quarter declined 14.3%, but topped analysts' expectations by a penny. The company also reaffirmed its earnings forecast for fiscal 2009.
In a statement, chief executive officer, David Steiner said, "The third quarter once again shows the strength of our strategy to maintain pricing while reducing costs. Our collection and disposal pricing remained strong, with internal revenue growth from yield of 2.9%. Recycling commodity prices increased each month in the third quarter, and have increased over 80% from the lows reached in January of 2009."
The company noted that the company-wide restructuring announced in February produced cost savings consistent with the prior quarter, and it expect to exceed the original forecast of annualized savings of $120 million.
Third Quarter Results
The Houston, Texas-based company reported net income of $277 million or $0.56 per share for the third quarter, lower than $310 million or $0.63 per share in the year-ago quarter.
The results for the latest quarter include $0.02 per share of the combined effects of charges related to the restructuring announced in February 2009, and a net benefit related to income tax audit settlements. Excluding items, Waste Management's adjusted net income for the quarter declined to $265 million or $0.54 per share from $312 million or $0.63 per share in the prior-year quarter. On average, 10 analysts polled by Thomson Reuters expected the company to earn $0.53 per share for the third quarter. Analysts' estimate typically excludes one-time items.
Operating revenues for the quarter declined to $3.02 billion from $3.53 billion in the same quarter last year, and narrowly missed eight Wall Street analysts' consensus estimate of $3.07 billion.
The decline in quarterly operating revenues include a decline of $189 million due to lower recycling revenues and electricity sales prices, $108 million was related to the decline in fuel surcharge revenue as crude oil prices declined, and $10 million was due to foreign currency translation.
Internal revenue growth from yield from collection and disposal operations was 2.9%, while internal revenue growth from volume was negative 8.9%.
Among Waste Management's peers, Phoenix, Arizona-based Republic Services, Inc. (RSG) is scheduled to report financial results for the third quarter on Monday, November 2, 2009. Analysts expect the company to report earnings of $0.36 per share on revenues of $2.07 billion for the third quarter.
Another peer, Lake Forest, Illinois-based Stericycle, Inc. (SRCL) reported Wednesday an increase in third quarter earnings, which topped analysts' estimates, on higher gross margins. Net income rose to $46.5 million or $0.54 per share from $39.2 million or $0.45 per share in the year-ago quarter. The results also reflect a 7.5% growth in revenues to $297.8 million, helped by contribution from acquisitions less than a year old.
Segmental Details
Waste Management's services include collection, solid and hazardous waste landfills, transfer, waste-to-energy facilities and independent power production plants, recycling and other services.
The company noted that its commercial and residential business lines continued to demonstrate recession resistant qualities. Most of the volume weakness was seen at the economically sensitive industrial collection, landfill and transfer businesses. However, Commercial revenue, excluding revenue from fuel surcharge, remained solid, declining only 0.7%, and residential revenue, excluding revenue from fuel surcharge, performed even better, declining only 0.4% from last year.
Revenues for collection business, which forms a major chunk of the company's operating revenues, decreased to $2.02 billion from $2.23 billion in the year-ago quarter. Landfill business contributed revenues of $666 million, a decline from last year's $787 million.
Revenue for transfer business decreased to $359 million from $417 million in the prior-year quarter. Wheelabrator business revenues for the quarter decreased to $214 million from $245 million last year. The company's recycling business generated revenues of $202 million, sharply lower than the year-ago quarter's $344 million.
Other Metrics
Income from operations for the third quarter declined to $525 million from $632 million in the prior-year quarter.
Operating expenses for the quarter totaled $1.86 billion, about 16.4% lower than $2.22 billion in the year-ago quarter. Selling, general and administrative expenses decreased to $339 million from $369 million in the comparable quarter last year.
Waste Management ended the third quarter with cash and cash equivalents of $612 million, compared to $504 million at end of the prior-year quarter.
In order to cope up with the tough economic conditions, the company announced a reorganization program in February that will cost about $50 million to implement, but will result in annualized savings in excess of $100 million. Consequently, the company currently continues to anticipate annualized savings from restructuring to exceed $120 million.
The company noted that the company-wide restructuring announced in February produced cost savings consistent with the prior quarter, and it expect to exceed our original forecast of annualized savings of $120 million.
Nine Month Highlights
For the nine-month period, Waste Management reported net income of $679 million or $1.37 per share, lower than $869 million or $1.75 per share in the year-ago period.
Operating revenues for the year-to-date period declined to $8.79 billion from $10.28 billion in the same period last year.
Looking ahead…………
"Economic conditions and our volumes have stabilized. So, as we look to the fourth quarter of this year, we expect the rate of decline in volumes to be slightly better than the rate of decline in the third quarter of 2009. In addition, our recycling business has shown consistent improvement since the lows in commodity prices reached during January 2009, and we expect a positive $0.02 to $0.04 impact on earnings per diluted share from our recycling operations in the fourth quarter of 2009, compared with the prior year period," Steiner added.
The company also added that it expects lower year-over-year natural gas prices to cause lower electricity sales prices in the fourth quarter of 2009, which would cause earnings to decline $0.02 to $0.04 per share. The company expects the negative effect from lower electricity sales prices to be offset by the positive effect from recycled commodities prices.
For fiscal 2009, Waste Management continues to projects adjusted earnings for the full year in a range of $1.95 to $1.99 per share. Analysts expects the company to report earnings of $1.97 per share for the full year 2009.
Stock Quote
In Thursday's regular trading session, WM is currently trading at $30.80, up $0.18 or 0.59% on a volume of 0.31 million shares. In the past 52-week period, the stock has been trading in a range of $22.10 to $33.99.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.