Waste Connections Earnings: Shrinking Margins for Fifth Consecutive Quarter, Net Income Falls

Waste Connections Inc. (NYSE:WCN) reported its results for the second quarter. Waste Connections is an integrated solid waste services company that provides solid waste collection, transfer, disposal and recycling services in mostly secondary markets in the western and southern United States.

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Waste Connections Inc. Earnings Cheat Sheet

Results: Net income for Waste Connections Inc. fell to $42.4 million (36 cents per share) vs. $44.4 million (39 cents per share) a year earlier. This is a decline of 4.5% from the year-earlier quarter.

Revenue: Rose 5.3% to $410.7 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Waste Connections Inc. fell in line with the mean analyst estimate of 36 cents per share. Analysts were expecting revenue of $409.9 million.

Quoting Management: “The first half of 2012 played out about as expected with revenue, adjusted operating income before depreciation and amortization, and adjusted free cash flow at or above our expectations. However, the tepid economy and potential near-term decreases in recycled commodity values could provide additional headwinds in the second half of the year,” said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. “We are pleased to announce the acquisition of SKB Environmental, Inc., a leading provider of solid and industrial waste transfer and disposal services primarily in Minnesota’s Twin Cities region, with annual revenue of approximately $30 million. We believe SKB provides an attractive platform for additional acquisitions in this new market.”

Key Stats:

Last quarter was the fifth in a row that the company saw shrinking gross margins, as they fell 1.2 percentage points from the year-earlier quarter to 42%. In that span, margins have contracted an average of 0.8 percentage point per quarter on a year-over-year basis.

Revenue has increased for four consecutive quarters. Revenue increased 13.6% to $376.4 million in the first quarter. The figure rose 13% in the fourth quarter of the last fiscal year from the year earlier and climbed 16.8% in the third quarter of the last fiscal year from the year-ago quarter.

The company’s net income has fallen in each of the last two quarters. In the first quarter, net income fell 14.3% from the year-earlier quarter.

The company met estimates last quarter after topping forecasts in the previous quarter with net income of 32 cents versus a mean estimate of net income of 31 cents per share.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the third quarter is 40 cents per share, down from 43 cents ninety days ago. The average estimate for the fiscal year is $1.46 per share, down from $1.50 ninety days ago.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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