Earnings season is in full swing, with huge numbers of companies having already given their latest numbers to investors, and Waste Management is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.
As a recycling and trash-hauling specialist, Waste Management has transformed its business over the years to take advantage of what others throw away, but revenue growth has come to a near-standstill as recent hard times have hurt its municipal customers. Let's take an early look at what's been happening with Waste Management over the past quarter and what we're likely to see in its quarterly report on Thursday.
Stats on Waste Management
Analyst EPS Estimate
Change From Year-Ago EPS
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
Is Waste Management's stock trash or treasure?
Analysts have been comfortable with their estimates on Waste Management, leaving their guess for the quarter unchanged and pushing up their full-year 2013 consensus figure up a penny. But the stock has been far more optimistic, with shares rising nearly 16% since early November.
The waste industry is now much more than just hauling trash. The big trend lately has been toward taking advantage of trash to produce energy, both through incineration as well as by tapping the gases that landfills produce. Covanta leads the industry in converting waste to renewable energy, but Waste Management is aiming to take its current level of 550 megawatts and increase it by two-thirds within the next seven years. Having that income stream gives Waste Management an additional competitor advantage over smaller player Waste Connections , which lacks any substantial presence in the renewable energy space.
Moreover, Waste Management is making smart deals to bolster its results. Working with Clean Energy Fuels , the trash hauler has built out its fleet of natural-gas-powered vehicles. Meanwhile, by acquiring Greenstar, a recycling unit, Waste Management will increase its recycling capacity to 15 million tons annually as it seeks to reach 20 million by 2020.
One driver for Waste Management's stock gains came late last month, when some analysts speculated that Waste Management and Republic Services could spin off some of their land and other property into real estate investment trusts to capture beneficial tax treatment. Even though Waste Management said it had no such plans, that doesn't preclude it from making such a move in the future.
Watch Waste Management's quarterly report closely to see which projects are getting priority treatment. That will give you a sign of where the company expects to find the best growth opportunities.
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The article Waste Management Earnings: An Early Look originally appeared on Fool.com.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Clean Energy Fuels, Republic Services, and Waste Management. The Motley Fool owns shares of 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.
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