Tony Soprano made big money in garbage. But can a small outfit like Motley Fool Inside Value Waste Management
What analysts say:
- Buy, sell, or waffle? Eleven analysts follow Waste Management, giving it nine buy ratings and a pair of holds.
- Revenues. On average, they're looking for sales to slip 1% to $3.41 billion.
- Earnings. Regardless, profits are predicted to rise 7% to $0.59 per share.
What management says:
Is there such a thing as "Compassionate Capitalism"? (Actually, there is. It's a book by Salesforce.com
Over at Waste Management, CEO David Steiner has also hitched his wagon to the garbage truck of environmental protection. In a presentation at the World Business Forum earlier this month, Steiner described Waste Management's efforts to double the amount of power it produces from "waste-based energy production," more than triple the volume of material it recycles, and more than quadruple the number of its facilities certified by the Wildlife Habitat Council -- all by 2020. The firm also aims to invest as much as $500 million per year over the next 10 years to improve fuel efficiency in its garbage truck fleet.
At least three of these initiatives promise to "do well" for shareholders while also doing good. Selling energy is good business these days. Steelmakers Nucor
What management does:
Cost containment has already proven good business -- and necessary -- at Waste Management. So far this year, revenues are already down 1.4%, but operating margins are on the rise thanks to the firm cutting its operating costs by 3.5% to (more than) compensate. They're not yet at the level that rivals Allied Waste
3/06 |
6/06 |
9/06 |
12/06 |
3/07 |
6/07 |
|
---|---|---|---|---|---|---|
Operating |
14.3% |
14.8% |
15.3% |
15.4% |
15.9% |
16.4% |
Net |
9.2% |
8.3% |
8.9% |
8.6% |
9.0% |
8.5% |
One Fool says:
Over at Motley Fool Inside Value, where we've been known to dumpster-dive from time to time, we've recommended Waste Management for three key reasons. Bargain-hunting guru Philip Durell sums up his investment thesis thusly: "The company consistently produces a ton of cash and just as consistently returns it to shareholders through dividends and buybacks. These undervalued shares make an excellent low-risk investment in a long-term predictable business."
Since Philip penned those words, the picture he painted at the time hasn't changed much. Waste Management has generated $594 million in free cash flow (down 9% year-over-year, but improving in the second quarter). Yielding 2.5%, the dividend is almost as rich as when Philip recommended the stock. And the company is still buying back shares -- spending $196 million for this purpose last quarter.
Did Waste Management keep on truckin' in Q3? We'll have a detailed update on the firm's performance for our subscribers shortly after earnings come out. Make sure to sign up for your free trial to Inside Value now, to ensure you can read the update as soon as it comes out.