Waste Connections (WCN) Strong on Dividends, Liquidity Ails

Waste Connections, Inc. WCN is currently benefiting from its low-overhead, highly-efficient operational structure as well as investor-aiding steps.

Waste Connections reported solid third-quarter 2022 results, wherein both earnings and revenues surpassed the respective Zacks Consensus Estimate. Adjusted earnings (excluding 18 cents from non-recurring items) of $1.10 per share beat the Zacks Consensus Estimate by 8.9% and increased 23.6% year over year. Revenues of $1.88 billion topped the Zacks Consensus Estimate by 0.3% and rose 17.7% year over year.

Shares of WCN have surged 8% in the past six-month period compared with 4.2% surge of the industry it belongs to.

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How Is Waste Connections Faring?

WCN generally focuses on providing vertically integrated services, from collection through disposal of solid waste in landfills that it owns or operates. In addition, the operations are managed on a decentralized basis to place decision-making authority close to the customer, enabling it to identify and address customers’ needs on a real-time basis in a cost-effective manner. This low-overhead, highly-efficient operational structure allows it to expand into geographically contiguous markets and operate in relatively small communities that other competitors may not find attractive.

Waste Connections’ is consistent in rewarding its shareholders. In 2021, 2020 and 2019, the company paid $220.2 million, $199.9 million and $175.1 million as dividends, respectively. In 2021 and 2020,  it repurchased shares worth $339 million and $105.7 million, respectively. However, in 2019, WCN did not repurchase any share. Such moves indicate the company’s commitment to create value for shareholders and underline its confidence in its business.  

A Key Risk

Waste Connections’ current ratio (a measure of liquidity) at the end of third-quarter 2022 was pegged at 0.89, lower than the current ratio of 0.94 at the end of the previous quarter and 1.01 reported at the end of prior-year quarter. Decreasing current ratio is not desirable as it indicates that the company may have problems meeting its short-term debt obligations.

Zacks Rank and Stocks to Consider

WCN currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Zacks Business Services sector are Booz Allen Hamilton Holding Corporation BAH and  and DocuSign, Inc. DOCU.

Booz Allen sports a Zacks Rank #1 at present. BAH has a long-term earnings growth expectation of 8.9%.

Booz Allen delivered a trailing four-quarter earnings surprise of 8.8%, on average.

DocuSign is currently Zacks #1 Ranked. DOCU has a long-term earnings growth expectation of 13.7%.

DOCU delivered a trailing four-quarter earnings surprise of 6.6%, on average.


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