By: Chris Vasil
Shares of Waste Management, Inc. WM scaled a new 52-week high of $85.36 during today's trading session for a healthy year-to-date return of 19.9%. Barring minor hiccups, Waste Management's share price has steadily been on an uptrend since mid-May. This Zacks Rank #3 (Hold) stock has the potential for further price appreciation with long-term earnings growth expectation of 9.6%.
Waste Management is successfully executing its initiatives to refocus on core business activities and instill price and cost discipline to achieve better margins. At the same time, the company aims to improve customer retention by providing better service and higher value solutions. Waste Management's successful cost-reduction initiatives have further helped it achieve remarkable gross margin expansion and EBITDA (earnings before interest, tax, depreciation and amortization) growth over the quarters.
In addition, Waste Management plans to return significant cash to shareholders through healthy dividends and share repurchases in the future. A steady dividend payment policy is part of its long-term strategy of providing attractive risk-adjusted returns to its stockholders. The company's investment strategy takes a holistic view of the rapidly evolving market and deploys a dynamic capital allocation approach to execute its growth strategy. Furthermore, decent dividend increases at periodic intervals have been one of the company's most attractive features.
With strong yield, volume and cost performance in the third quarter, the company has raised its guidance for 2017. It expects 2017 adjusted earnings in the range of $3.19 to $3.21 per share compared with earlier expectations of $3.14 to $3.18. Free cash flow is expected between $1.7 billion and $1.8 billion, up from previous expectations of $1.5 billion to $1.6 billion. Such a bullish outlook raises investor confidence in the stock.
All these measures and solid inherent growth potential probably raised investor confidence and drove its shares to a new 52-week high.
WM Crosses Above Average Analyst Target:
In recent trading, shares of Waste Management, Inc. WM have crossed above the average analyst 12-month target price of $83.67, changing hands for $83.91/share. When a stock reaches the target an analyst has set, the analyst logically has two ways to react: downgrade on valuation, or, re-adjust their target price to a higher level. Analyst reaction may also depend on the fundamental business developments that may be responsible for driving the stock price higher - if things are looking up for the company, perhaps it is time for that target price to be raised.
There are 6 different analyst targets contributing to that average for Waste Management, Inc. , but the average is just that - a mathematical average. There are analysts with lower targets than the average, including one looking for a price of $73.00. And then on the other side of the spectrum one analyst has a target as high as $88.00. The standard deviation is $6.022.
But the whole reason to look at the average WM price target in the first place is to tap into a "wisdom of crowds" effort, putting together the contributions of all the individual minds who contributed to the ultimate number, as opposed to what just one particular expert believes. And so with WM crossing above that average target price of $83.67/share, investors in WM have been given a good signal to spend fresh time assessing the company and deciding for themselves: is $83.67 just one stop on the way to an even higher target, or has the valuation gotten stretched to the point where it is time to think about taking some chips off the table?
Waste Management is scheduled to release their next quarterly earnings announcement on Wednesday, February, 14th 2018.
The company provided earnings per share guidance of $3.19-3.21 for the period, compared to the Thomson Reuters consensus EPS estimate of $3.18.
The business services provider reported $0.90 earnings per share (EPS) for the quarter, topping analysts' consensus estimates of $0.88 by $0.02. The business services provider had revenue of $3.72 billion for the quarter, compared to the consensus estimate of $3.71 billion. Waste Management had a return on equity of 25.61% and a net margin of 9.66%. The business's quarterly revenue was up 4.7% compared to the same quarter last year. During the same period in the previous year, the company earned $0.84 earnings per share.
Waste Management has a market capitalization of $36.72 billion and generates $13.61 billion in revenue each year. The business services provider earns $1.18 billion in net income (profit) each year or $3.11 on an earnings per share basis. Waste Management employs 41,200 workers across the globe.
Waste Management, Inc. (WM) is a holding company. The Company, through its subsidiaries, is a provider of waste management environmental services. The Company's segments include Solid Waste and Other. The Company's Solid Waste segment includes its solid waste business. The Other segment includes its Strategic Business Solutions (WMSBS) organization; its landfill gas-to-energy operations and third-party subcontract and administration services managed by its Energy and Environmental Services and WM Renewable Energy organizations; its recycling brokerage services, and its service offerings and solutions, such as portable self-storage and long distance moving services, fluorescent lamp recycling and interests it holds in oil and gas producing properties. As of December 31, 2016, the Company owned or operated 243 solid waste landfills and five secure hazardous waste landfills. Its recycling brokerage services involve managing the marketing of recyclable materials for third parties.
Waste Management WM had its Relative Strength (RS) Rating upgraded from 69 to 72 earlier this month -- a welcome improvement, but still short of the 80 or better score you prefer to see.
This proprietary rating tracks technical performance by using a 1 (worst) to 99 (best) score that indicates how a stock's price action over the trailing 52 weeks compares to other publicly traded companies.
History reveals that the top-performing stocks often have an 80 or better RS Rating as they launch their biggest price moves. See if Waste Management can continue to rebound and hit that benchmark.
Waste Management has moved more than 5% past a 74.68 entry in a first-stage flat base, meaning it's now out of a proper buy range. Look for the stock to offer a new chance to get in like a three-weeks tight or pullback to the 50-day or 10-week line.
The company reported 7% earnings growth last quarter. Revenue increased 5%.
The company holds the No. 2 rank among its peers in the Pollution-Control industry group.