WM Update 8-31-2011 - Waste Management Inc. (WM) Pitch...

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Unformatted text preview: Waste Management Inc. (WM) Pitch Update 9/1/11 Recent Developments Second Quarter Earnings Announced financial results for its second quarter ended June 30, 2011. Revenues for the second quarter of 2011 were $3.35 billion compared with $3.16 billion for the same 2010 period, an increase of 6.0%. Net income for the quarter was $237 million, or $0.50 per diluted share, compared with $246 million, or $0.51 per diluted share, for the second quarter of 2010. Full year adjusted EPS revised downward to between $2.14 and $2.18, a decrease of approximately 5% Acquired Oakleaf Global Holdings Waste Management announced the acquisition of smaller garbage-collection company, Oakleaf Global Holdings, for $425 million Oakleaf is a privately-owned waste services company providing outsourced waste and recycling services through a nationwide network of third-party haulers Oakleaf generated approximately $580 million in revenues in 2010 Oakleaf, with $580 million in revenue last year, is about one-sixth the size of Waste Management. Will not add to earnings in the next 3 to 6 months. Waste Management said the deal would produce at least $80 million a year in EBITDA, going forward. Previous thesis - Commentary Continued Improvements in Pricing & Volume with Existing Customers The economy has not continued the expected path to recovery, which has resulted in lower than expected volume growth The company has been able to achieve its pricing objectives across its segments and maintain low levels of customer churn (<10%) However, overall yield is lower than anticipated for the year-to-date period. Higher commodity and input costs have impacted margins Bundled Medical Waste Contracts Provide Growth Opportunity Headwind in recent quarter created by capital expenditures of approximately $19m to improve efficiencies in procurement, routing, logistics and centralization of operations. Expenditures consistent with guidance for the year. Extracting Value from Trash Headwinds from investment to upgrade facility acquired in VA. Expiration of long-term power capacity contract in South Florida Headwinds expected to abate in second half and performance to be flat over 2H 2010. Earnings growth projected to begin in Q1 2012 Updated Thesis/Outlook Short-term catalyst is unlikely Short-term growth looks to be minimal, as economic recovery is very uncertain However there is potential for short-term price appreciation as the stock and economy continue to recover from summer lows Long-term Growth Prospects Remain Attractive and Very Attainable Longer-term growth prospects remain attractive Limited downside risk with appreciation potential Price support from dividend yield (currently 4.2%) - Recommendation: HOLD ...
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This note was uploaded on 02/05/2012 for the course FINANCE 101 taught by Professor George during the Spring '11 term at University of Phoenix.

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