Waste & Recycling Giant Returns $472m to Shareholders : Earnings Up on Lower Revenues at Waste Management Inc.

Revenues for the third quarter of 2015 at Houston, Texas based waste and recycling firm Waste Management, Inc. (NYSE: WM) fell to $3.36 billion compared with $3.60 billion for the same 2014 period.

According to the latest set of accounts published by the company net income for the quarter was $335 million, compared with net income of $270 million for the third quarter of 2014. On an as-adjusted basis, excluding certain items, net income in the third quarter of 2014 was $311 million.

The company also saw a $48 million increase in internal revenue growth from its traditional solid waste business and a $53 million increase in revenues from acquisitions. However, overall revenue declined by 6.7%, or $242 million, compared to the third quarter of 2014. That revenue decline stemmed from a $186 million decline from divestitures, $49 million in lower recycling revenues, $47 million in lower fuel surcharge revenues and $41 million in foreign currency fluctuations.

WM also noted that average recycling commodity prices were approximately 15.0% lower in the third quarter of 2015 compared with the prior year period.

Further, recycling volumes declined 6.4% in the third quarter. However, despite these declines, the company said that earnings per diluted share from its ecycling operations were flat when compared to the prior year period as a result of operational improvements in our recycling business.

Meanwhile, operating expenses excluding divestitures improved by $91 million. The company attributed this to lower fuel and subcontractor costs, lower commodity rebates, continued route optimisation, and foreign currency fluctuations. As a percent of revenue, operating expenses were 62.4% in the third quarter of 2015, as compared to 63.8% in the third quarter of 2014 after excluding divestitures.

Net cash generated by operating activities was said to be $657 million in the third quarter and the company returned $472 million to shareholders, including $300 million in share repurchases and $172 million in dividends.

“Our third quarter results reflect the impact of our continued commitment to core price, disciplined growth, and cost controls, all of which are driving improvement in our key operating metrics. Each of our net income, operating income and margin, operating EBITDA and margin, and earnings per diluted share improved when compared to the third quarter of 2014,” commented David P. Steiner, president and chief executive officer of Waste Management, commented.

“We made good progress on improving volumes in the third quarter, as internal revenue growth from our traditional solid waste volumes improved 180 basis points compared to the third quarter of 2014, and we saw positive volume growth in our very profitable industrial line of business,” he continued.

“Internal revenue growth from volumes has improved each quarter since the first quarter of 2015,” added Steiner. “We expect them to continue to strengthen into 2016 with our continued focus on adding higher margin volumes, and avoiding volume growth at below market rates. In addition, we generated strong free cash flow in the third quarter, allowing us to return $472 million to our shareholders.”

“We have now produced three consecutive quarters of strong results, and we expect that to continue as we conclude the year and look forward to 2016… We also expect to exceed the upper end of our full year free cash flow guidance of $1.5 billion.”

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