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Will Tax Benefits Boost Waste Management (WM) Q1 Earnings?

Zacks Equity Research
Updated

Waste Management, Inc. WM is slated to report first-quarter 2018 results on Apr 20, before the opening bell.

The top line is expected to benefit from higher yield and volume growth in its collection and disposal business, while the bottom line is likely to be positively impacted by tax benefits.

We observe that shares of Waste Management have rallied 14.9% over the past year, outperforming the industry’s gain of 6.6%.

 

Strong Collection & Disposal Business to Boost Revenues

The Zacks Consensus Estimate for revenues in the to-be-reported quarter stands at $3,561 million, reflecting year-over-year growth of 3.5%. The year-over-year increase is likely to be driven by strong yield and volume growth in its collection and disposal business.

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In fourth-quarter 2017, revenues rose 5.5% from the year-ago quarter to $3,652 million.

Waste Management, Inc. Revenue (TTM)

 

Waste Management, Inc. Revenue (TTM) | Waste Management, Inc. Quote

Earnings Likely to Grow on Tax Benefits

The Zacks Consensus Estimate for earnings per share (EPS) in the to-be-reported quarter is pegged at 82 cents, indicating year-over-year growth of 24.2%. We expect the company to witness bottom-line growth on the back of tax benefits.

Moreover, the company’s focus on its traditional solid waste business have helped it partially offset the increased recycling costs and higher fuel expenses. The company's successful cost-reduction initiatives have helped it record remarkable operating income margin and operating EBITDA margin expansion along with EBITDA growth.

In fourth-quarter 2017, earnings grew 13.2% from the year-ago quarter to 85 cents. The company enjoyed a net tax benefit of $1.21 per share in its fourth-quarter 2017 earnings.

Our Model Doesn’t Suggest a Beat

Please note that according to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Waste Management has a Zacks Rank #3 and an Earnings ESP of 0.00%, a combination that makes surprise prediction difficult.

Stocks to Consider

Here are some stocks from the broader Business Services sector that investors mayconsider, as our model shows that these have the right combination of elements to beat on earnings in first-quarter 2018:

Mastercard Incorporated MA has an Earnings ESP of +2.39% and a Zacks Rank #2. The company is slated to report quarterly numbers on May 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Brink’s Company BCO has an Earnings ESP of +5.25% and a Zacks Rank #2. The company is slated to report quarterly results on Apr 25.

FLEETCOR Technologies, Inc. FLT has an Earnings ESP of +0.37% and a Zacks Rank #2. The company is expected to report quarterly numbers on May 7.

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FleetCor Technologies, Inc. (FLT) : Free Stock Analysis Report
 
Brink's Company (The) (BCO) : Free Stock Analysis Report
 
Mastercard Incorporated (MA) : Free Stock Analysis Report
 
Waste Management, Inc. (WM) : Free Stock Analysis Report
 
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Zacks Investment Research