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Why Waste Connections Stock Is Up Today
Key Points
Acquisitions are helping to drive Waste Connections' profits higher.
The disposal services provider is passing much of this cash on to its stock owners.
Shares of Waste Connections (NYSE:WCN) surged on Thursday after the garbage hauler boosted its cash payouts to investors.
Image source: Getty Images.
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Turning trash into cash
Waste Connections' third-quarter revenue rose 7% year over year to $2.6 billion.
The trash collector employs a growth-through-acquisition business model, enabling it to steadily expand its waste services network. The acquisitions it completed so far this year are projected to add roughly $130 million in annualized revenue.
Additionally, Waste Connections' focus on exclusive and secondary markets gives it strong pricing power, allowing it to increase its fees above the rate of inflation. These price hikes have helped to offset rising fuel costs as diesel prices have spiked.
All told, Waste Connections' adjusted net income increased 7% to $399 million. Its earnings per share, boosted by stock buybacks, climbed 10% to $1.58. That topped Wall Street's estimates, which had called for per-share profits of $1.52.
Rising profits mean larger dividends for shareowners
These solid results prompted Waste Connections to lift its full-year financial forecast. Management now expects revenue of $10.1 billion, net income of $1.2 billion, and adjusted free cash flow of more than $1.4 billion.
The landfill operator also raised its quarterly dividend by 10% to $0.385 per share.
"The strength of our operating performance, free cash flow generation, and balance sheet positioned us for another double-digit annual increase in our quarterly cash dividend, our sixteenth in a row," CEO Ronald Mittelstaedt said.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Waste Connections. The Motley Fool has a disclosure policy.