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Waste Connections (WCN) Gains From Acquisitions, Forex Woes Hurt

Waste Connections Inc. WCN is gaining from increasing environmental concerns and rapid industrialization. The company’s acquisition strategy bodes well and is a growth driver.

Waste Connections, Inc. reported solid first-quarter 2023 results, wherein both earnings and revenues surpassed the respective Zacks Consensus Estimate. Adjusted earnings (excluding 12 cents from non-recurring items) of 89 cents per share beat the consensus estimate and increased 8.5% year over year. Revenues of $1.9 billion topped the consensus mark by 0.2% and rose 15.4% year over year.

WCN’s shares have outperformed the waste removal services market, growing 4.4% in the past year, compared with the industry’s 3.8% increase.

Waste Connections, Inc. Price

Waste Connections, Inc. Price
Waste Connections, Inc. Price

Waste Connections, Inc. price | Waste Connections, Inc. Quote

Current Situation of WCN

Waste Connections provides vertically integrated services, from collection to the disposal of solid waste in landfills that it owns or operates. The company is able to create a low-overhead, highly-efficient operational structure which allows it to grow geographically as well as serve smaller communities. It is reaping the early mover advantage in certain niche markets which enables it to be well-positioned in the market and generate higher financial returns.

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WCN’s acquisition strategy bodes well for its performance and helps strengthen its market position by improving the quality of service provided and adding customers to the company’s tally. In 2022, Waste Connections completed 24 acquisitions worth $2.3 billion, contributing $552 million in incremental revenues. During 2021, 2020 and 2019, the company completed 30, 21 and 21 acquisitions, respectively. Acquisitions contributed $215.39 million, $197.23 million and $291.93 million to revenues in 2021, 2020 and 2019, respectively.

Waste Connections has taken consistent efforts to reward its shareholders. In 2022, 2021 and 2020, the company paid $243 million,$220.2 million and $199.9 million in dividends and repurchased shares worth $425 million,$339 million and $105.7 million, respectively.

Some Concerning Points

Waste Connections’ revenues are troubled by seasonality and thus lowers revenue generation predictability and increases operating risks. The first-quarter revenues are always lower in comparison to the other quarters. While revenues rise in the second and third quarters, fourth-quarter revenues are always lower than the prior two quarters.

Having a global presence, Waste Connections is vulnerable to foreign currency exchange rate risk which takes a toll on the company’s bottom line. In 2022, revenues were impacted to the tune of $53.4 million due to unfavorable foreign exchange rates.

Zacks Rank and Stocks to Consider

WCN currently carries a Zacks Rank #3 (Hold).

Investors interested in the Zacks Business Services sector can consider the following stocks:

Green Dot GDOT: For second-quarter 2023, the Zacks Consensus Estimate of Green Dot’s revenues suggests a decline of 4.5% year over year to $339.2 million and the same for earnings indicates a 56.8% plunge to 32 cents per share. The company has an impressive earning surprise history, beating the consensus mark in all four trailing quarters, the average surprise being 37.3%.

GDOT has a Value score of A and currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Maximus MMS: For second-quarter 2023, the Zacks Consensus Estimate of Maximus’ revenues suggests an increase of 6.1% year over year to $1.2 billion and the same for earnings indicates a 46.2% rise to $1.14 per share. The company has an impressive earning surprise history, beating the consensus mark in three instances and missing on one instance, the average surprise being 9.6%. MMS has a VGM score of A along with a Zacks Rank of 2.

Rollins ROL: For second-quarter 2023, the Zacks Consensus Estimate of Rollins’ revenues suggests growth of 12.8% year over year to $805.2 million and the same for earnings indicates a 15% increase to 23 cents per share. The company has an impressive earning surprise history, beating the consensus mark in three of the four trailing quarters and missing on one instance, the average surprise being 5.53%.

ROL currently carries a Zacks Rank of 2.

 

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Green Dot Corporation (GDOT) : Free Stock Analysis Report

Waste Connections, Inc. (WCN) : Free Stock Analysis Report

Rollins, Inc. (ROL) : Free Stock Analysis Report

Maximus, Inc. (MMS) : Free Stock Analysis Report

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