Waste Management's Slow and Steady Progress

Slow and steady wins the investing race, and Waste Management's (NYS: WM) long slog back to its pre-recession highs is finally drawing close to the finish line. Full-year earnings reported yesterday saw the garbage hauler come within $10 million in revenue of its 2008 high-water mark, though profit remains $126 million beneath that year's impressive take. Guidance for the coming year is uninspiring, but there's no risk to profits. Will 2012 mark a replay of Waste Management's middling 2011, or can the stock sustain its slow momentum?

Headwinds ahead
Little has fundamentally changed from last year, as higher revenues were offset by rising fuel costs and other increased operating expenses. Let's take a look at some of the differences to see how Waste Management is recovering:

Source: Waste Management 10-K filing for 2011.

Top-line growth doesn't much mask a weaker bottom line, which was dinged by weaker-than-expected volume as well as higher fuel costs. There are signs that volume is nudging higher, which is one way to gauge the broader economy. CEO David Steiner pointed out that volume has increased for three straight quarters, and recycling volume is also growing at a brisk pace.

Looking forward
Waste Management's 2012 performance looks to continue the slow, steady growth one might expect from a company that's become a de facto garbage utility. The company's annual guidance came in at the low end of analysts' expectations, but earning at least $2.22 per share in 2012 is nothing to sneeze at. Waste Management's currently only half as costly as international rival Veolia Environment (NYS: VE) on a P/E basis. Waste Management and Republic Services (NYS: RSG) have such a lock on the American trash market that it's bounced Veolia right out of the country.

The first half of 2012 might not be the best time to pick up more shares, as Steiner anticipates things to be tougher until midyear, after which the company ought to bounce back. On the other hand, Waste Management's dividend yield is near five-year highs, and its P/E has yet to recover to last summer's highs. Potential overreactions to the muted guidance could make it an even more attractive buy, particularly if American macro trends continue to show unexpectedly strong growth.

Looking for more information on Waste Management? Take a look at some of the best of The Motley Fool's recent analysis, and while you're at it, add Waste Management to your watchlist for up-to-date news delivered daily.

Meanwhile, if you want a promising stock today but don't want to wait until the second half of 2012 to buy it, be sure to check out the one stock that our chief investment officer picked to crush the market. You'll find it in our brand new report "The Motley Fool's Top Stock for 2012." It highlights a company that is revolutionizing commerce in Latin America. For a limited time, you can get instant access to the name of this company for free by clicking here.

At the time thisarticle was published Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights. The Motley Fool owns shares of Waste Management. Motley Fool newsletter services have recommended buying shares of Waste Management, Republic Services, and Veolia Environnement, as well as writing a covered strangle position in Waste Management. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.