It has been about a month since the last earnings report for Waste Management (WM). Shares have added about 6.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Waste Management due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Waste Management Q3 Earnings Lag Estimates, Revenues Beat

Waste Management reported mixed third-quarter 2021 results, wherein the company’s earnings missed the Zacks Consensus Estimate but revenues surpassed the same.

Adjusted earnings per share of $1.26 missed the Zacks Consensus Estimate by 5.3% but improved 15.6% year over year. Total revenues of $4.67 billion beat the consensus estimate by 2.6% and increased 20.8% year over year.

In the reported quarter, the company witnessed $295 million of revenues from the acquisition of Advanced Disposal, $137 million in volume increases and $123 million of growth from yield.

Quarterly Numbers in Detail

The Collection segment recorded revenues of $2.98 billion, up 18.4% from the prior-year quarter’s figure. The Landfill segment’s top line grew 16.3% year over year to $1.10 billion. Total revenues in the Transfer segment were up 14.1% to $550 million. Recycling segment revenues increased 60% to $464 million. Other businesses’ revenues totaled $551 million, up 20.3% year over year.

Adjusted operating EBITDA of $1.31 billion increased 14.8% from the year-ago quarter’s level. Adjusted operating EBITDA margin fell to 28.1% from 29.5% in the prior-year quarter.

Adjusted operating income came in at $792 million, up 9.8% from the year-ago quarter. Adjusted operating income margin fell to 16.9% from 18.7% in the year-ago quarter.

Waste Management exited third-quarter 2021 with cash and cash equivalents of $116 million compared with $148 million at the end of the prior quarter. Long-term debt was $12.4 billion compared with $12.8 billion at the end of the prior quarter.

The company generated $1.18 billion of cash from operating activities while capital expenditures were $464 million. Free cash flow was $773 million.

During the reported quarter, the company returned $741 million to shareholders, which includes $241 million through cash dividends and $500 million through share repurchases.

2021 Outlook

Waste Management has raised its revenue outlook for 2021 while reaffirming the same for adjusted operating EBITDA and free cash flow.

Total revenue growth is now expected to be 17% to 17.5% compared with the prior growth rate of 15.5% to 16%. Combined internal revenue growth from yield and volume in the collection and disposal business is expected to be about 6.5%. The growth rate was earlier expected to be 5.5% or higher.

Adjusted operating EBITDA is expected to be between $5 billion and $5.1 billion. Free cash flow is estimated to be between $2.5 billion and $2.6 billion. The company is hopeful of repurchasing extra $350 million shares.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Waste Management has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Waste Management has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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