Source: Waste Management

Waste Management (NYSE: WM) announced financial results for the second quarter of 2015 on Thursday. The aptly named provider of waste management services delivered revenue and earnings that topped Wall Street's forecasts, driving shares more than 2% higher as I write this at 12:50 p.m.

Operating results
Revenue declined 6.9% year over year to $3.32 billion, but came in ahead of the $3.29 billion analysts were projecting. Most of the decline was related to businesses that Waste Management sold during the last year, but lower recycling and fuel charge revenue also added to the drop.

Overall volume declined 1.3% in the second quarter, as the company maintained a strict focus on more profitable business. This discipline was also apparent in the 4.1% improvement in core pricing relative to the year ago period. And management expects volumes to strengthen through the rest of 2015 and into 2016.

Operating expenses as a percent of revenue were 63.6%, as compared to 64.2% in the second quarter of 2014. Lower fuel and subcontractor costs, commodity rebates, and continued route optimization drove the 60 basis point improvement. Combined with reduced interest expenses and a lower effective tax rate, this contributed to a 13% rise in net income. And share buy backs helped adjusted earnings per share increase an even higher 15% to $0.67. That figure surpassed the $0.63 in EPS Wall Street was expecting.

Cash generation and capital return program
A reduction in cash taxes also helped drive a 47% increase in cash provided by operating activities -- which totaled $816 million in the second quarter -- and a 73% jump in free cash flow to $579 million.

That strong cash generation allowed Waste Management to return $475 million to shareholders during the quarter, including $300 million in share repurchases and $175 million in dividends.

Looking ahead, management anticipates an additional $300 million of share repurchases in the third quarter. The company also plans to use its excess cash to make acquisitions in its solid waste business, and expects to reach agreements in the second half of 2015 to acquire an additional $50 million-$75 million of operating EBITDA.

Management now expects full year adjusted earnings per share to be at the high end of its previously announced guidance of between $2.48-$2.55. The company also expects to achieve the upper end of its full year free cash flow guidance of between $1.4 billion-$1.5 billion.

"We are pleased with the strong results through the first half of 2015," said CEO David Steiner in a press release. "Combining the first half results with our outlook for continued price and cost control discipline and improving volumes, we are confident that the momentum we saw in the first half of the year will continue in the second half of the year." 

Investor takeaway
Waste Management remains a wide-moat cash flow machine. The trash collector has struggled to increase revenue in recent years, but its vast network of landfills and recycling centers provides it with a nearly insurmountable competitive advantage that helps to insulate its cash flow.

In addition, collection volumes finally appear to be stabilizing, which, when combined with the likelihood of additional price increases and improving margins, should help to renew revenue and profit growth in the coming quarters. 

As such, investors are likely to be rewarded with a steadily rising dividend stream -- as well as the possibility of buyback-supported share price appreciation -- in the years ahead.