Waste Management announces 2014 earnings and 2015 outlook

By Katie Fletcher | February 17, 2015

On Feb. 17, Waste Management Inc. released fourth quarter and full year 2014 earnings, reporting $3.44 billion fourth quarter revenues, compared with $3.5 billion for quarter four 2013, and net income of $590 million during the fourth quarter, or $1.28 per diluted share, compared with a net loss of $605 million, or a negative $1.29 per diluted share, for the same period in 2013.

WM’s adjusted fourth quarter 2014 results, excluding a tax affected 61 cents per diluted share impact, primarily from a gain on sale of the company’s waste-to-energy (WTE) business, Wheelabrator Technologies Inc., would have been $308 million for net income, 67 cents per diluted share in the fourth quarter 2014, compared with $263 million, or 56 cents per diluted share, during the same period in 2013.

David Steiner, president and CEO of WM, said during the investor call that the company continues to drive core price and focus on cost controls to drive growth in earnings, margins and free cash flow. He added that the company anticipates this momentum to carry over into 2015. He states that WM achieved its highest adjusted earnings per share (EPS) to date in 2014. Additionally, the company’s traditional solid waste business grew in income from operations and operating earnings before interest, taxes, depreciation and amortization (EBIDTA), and expanded margins in both measures.

In 2014, the company reported revenues of $14 billion compared to $13.98 billion in 2013. Internal revenue growth from yield for collection and disposal operations was 2 percent for the fourth quarter and 2.3 percent for the full year. Internal volume growth was negative 0.8 percent for the fourth quarter and a negative 1.4 percent for the full year. Core price increases were 3.9 percent for the fourth quarter 2014 and were 4 percent for the full year, compared to 3.8 percent for the full year 2013.

Free cash flow was $2.1 billion in the fourth quarter and for the full year 2014 free cash flow was $3.4 billion. WM sold several assets, including Wheelabrator, and over paid approximately $210 million of 2015 cash taxes in 2014. Excluding these affects, free cash flow would have been $360 million for the fourth quarter and approximately $1.4 billion for the full year.

Biomass Magazine reported at the end of December that Wheelabrator had announced the close of its $1.94 billion acquisition by Energy Capital Partners from Waste Management. Now, with the close of the transaction, WM will continue to be a core Wheelabrator customer under long-term waste supply agreements. Wheelabrator has 15 WTE facilities, four independent power producing facilities, four ash monofills and three waste transfer stations.

Steiner stated on the call that during 2014, WM set the stage for increasing shareholder value by selling Wheelabrator and operations in Puerto Rico and Eastern Canada for proceeds of about $2 billion. Those assets, primarily Wheelabrator, amounted to 18 cents per diluted EPS, and $231 million of operating EBITDA in 2014.

Steiner also commented that given the time necessary to identify targets, negotiate agreements and get any necessary regulatory approvals, 2015 guidance assumes the company will not close on any acquisitions in the year, besides the already announced acquisition of Deffenbaugh Disposal and other normal tuck-in acquisitions.

Upon mid-year, WM expects it will know the amount of proceeds that will be applied to acquisitions, and expects to purchase at least enough shares to offset any dilution in 2015. Steiner said that 2015 will be a transition year for the company. “We continue our pricing and cost efforts while focusing on redeploying the Wheelabrator proceeds,” he said. “In our solid waste business, we have targeted about 10 percent earnings growth in 2015 and another year of strong free cash flow growth.”