W) Is WMI a waste of time?
Rated a WATCH
An Illinois company. I remember the insiders mass dumped the stock in 1999 and it dropped 35% in a day and never recovered. Once the sector was the darling of wall street and WMI was the king.
Overview
Waste Management, formerly USA Waste Services, is at the top of the heap in the solid-waste industry (Allied Waste is #2). The company serves municipal, business, and residential customers in the US, Canada, Mexico, and Puerto Rico. It has a network of landfills and collection operations as well as waste transfer, disposal, and recycling services. In 1998 USA Waste bought the top-ranked but faltering Waste Management and took the Waste Management name and lots of its problems. To reduce debt, the company is selling off the operations of Waste Management International, which offers solid- and hazardous-waste management services in Asia, Europe, the Pacific Rim, and South America.
Analysts
12-May-00 10:00 -- 11:00 ET
Waste Mgt (WMI) 18 1/2 -7/16: -- Update -- First Analysis Sec upgrades to ACCUMULATE from NEUTRAL with a $26 price target after the company reported Q1 results that indicate it is well on its way to internally rebuilding itself.
12-May-00 10:00 -- 11:00 ET
Waste Mgt (WMI) 18 5/8 -5/16: -- Update -- Salomon Smth Brny upgrades to OUTPERFORM from NEUTRAL after Wednesday's positive earnings release.
12-May-00 09:30 -- 10:00 ET
Waste Mgt (WMI) 18 5/16 -5/8: PaineWebber upgrades to ATTRACTIVE from NEUTRAL; ups price target to $22 from $16 on better than expected Q1 results and improved visibility on a number of operating and nonoperating issues.
The CNET Investor Alert - Today's Top Picks
By: CNET Investor Staff
5/12/00 10:20:25 AM
Source: CNET Investor
- Waste Management Receives Bullish Broker Reports
San Francisco, CA, May 12, 2000, 10:00 am PST -
Waste Management (NYSE: WMI - Quote, Broker Reports) is the subject of two bullish broker reports in Today's Top Picks feature at CNET Investor. Analysts from PaineWebber Inc. and Salomon Smith Barney raised their "neutral" recommendation to "attractive" and "outperform", respectively. Leone Young, analyst at Salomon Smith Barney expects the stock price to hit $22.00 per share in the next 12 months.
The Texas-based trash hauler announced first-quarter earnings that beat analysts estimates by 2 cents as they reported pro forma earnings per share of $.26 on Wednesday. The news boosted the company's share price by 26% yesterday, their biggest one-day jump, as it reached its highest closing price since October 12, 1999, at $18.94.
Waste Management is trading down $0.50 a share, or 2.64%, to $18.44 at mid-day
11-May-00 11:00 -- 12:00 ET
Waste Mgt (WMI) 17 3/4 +2 3/4: Merrill Lynch upgrades to NT ACCUM/LT ACCUM from NT NEUT/LT NEUT. after the company beat estimates after the close yesterday.
26-Apr-99 10:00 -- 11:00 ET
DLJ Focus List : DLJ adds Nike Inc. (NKE 61 13/16 +7/16), Tyco International (TYC 83 13/16 +15/16) and Waste Management Inc. (WMI 52 15/16 -1/8) to its "Focus List"
News of note
31-Dec-99 11:00 -- 12:00 ET
Waste Management (WMI) 17 3/16 +1/4: Wall Street Journal reports that the company said it vastly overpaid for Eastern Environmental Services Inc. when it acquired the company last year; in a lawsuit filed in a Federal Court in Delaware, WMI alleges that Eastern's chairman, Louis D. Paolino Jr., orchestrated "a classic pump and dump," overstating the profits of his company through accounting fraud and then selling it; the suit also alleges that two former WMI officers benefitted personally from the deal.....
09-Nov-99 BEFORE THE OPEN
Yellow Corp. (YELL) 16 13/16: transportation company announces the resignation of Chairman, President and CEO, A. Maurice Myers to be replaced by William D. Zollars, currently President of the company's largest subsidiary, Yellow Freight System; see press release ; Myers will be taking the Chairman, CEO and President titles at Waste Management Inc. (WMI 18 3/8); see press release .....
22-Oct-99 08:15 ET
Waste Management Inc. (WMI) 16 13/16: The Wall Street Journal reporting that WMI will reveal another case of massive accounting irregularities resulting in a Q3 charge up to $1 bln; WMI took a $3.54 bln charge in February 98 that was revealed as part of the due diligence process for their merger with USA Waste Services; latest audit was spurred by a July discovery that WMI had included, without initially disclosing, some one-time gains that inflated profits for Q1 and were included in Q2 projections.
16-Aug-99 BEFORE THE OPEN
Waste Management Inc. (WMI) 23 5/8: waste management services company announces changes in top management; Ralph V. Whitworth will become Chairman and Robert S. (Steve) Miller is the new President and CEO; the company will also shed some of their underperforming assets to focus on North American operations.....
29-Jul-99 09:00 ET
Waste Management (WMI) : --Update-- Company also announces resignation of CFO Earl E. DeFrates and General Counsel Gregory T. Sangalis.
07-Jul-99 09:18 ET
Waste Management Inc. (WMI) down more than 12 pts on news company will disappoint in the Q2 and full year.
Opinions
11-May-00 15:01 ET
Waste Management (WMI) 18 5/16 +3 5/16: It appears Waste Management has finally found its footing after a horrendous 1999. The company reported pro-forma Q1 net income of $161.3 mln, or $0.26 per diluted share, a penny better than consensus estimates after adjusting for unusual items. The items referred to in this case are related to the company's stabilization efforts and process improvement initiatives. You'll recall that last year the company was plagued by accounting improprieties that sent the stock into a free-fall from the $57 high in June to the March low of $13. These were not your standard accounting mistakes either, this was a disaster of catastrophic proportion that resulted in numerous lawsuits and the eventual replacement of senior management. The company was on the acquisition trail hot and heavy for some time and without getting into the specifics, let's just say their due diligence process in a few of the deals was spotty. WMI substantially overpaid for some of the acquisitions, resulting in a one-time charge of approximately $1 bln as well as numerous earnings warnings and misses. Some of WMI's senior executives were implicated, and not just for negligence, but for personally benefitting from some of the improprieties. Needless to say, numerous resignations followed and the company began the long and difficult process of rebuilding. Many of those acquisitions of the past few years have now been divested and the company continues to pare down operations announcing divestiture agreements, mainly of foreign operations, that will net the company approximately $1.3 bln. In addition, former Yellow Corp. (YEL) Chief, Maurice Myers, who took over the Chairman, President and CEO position at WMI in November, has done all the right things to restore confidence to their largely institutional shareholder base. Such moves include paying down the debt level, reducing their DSO, naming a VP of Business Ethics and Compliance, a new VP of Corporate Security as well as spending some $100 mln in consulting fees for process improvement and an overhaul of the employee pension plan. WMI has quite a ways to go to restore the confidence of the investment community, but Q1 operating revenue growth of 4.7%, and an 88% increase in cash generated from operations is certainly a step in the right direction. As money managers return to value stocks and WMI management continues to execute their turnaround strategy, expect WMI shares to outperform going forward. - Matt Gould, Briefing.com
04-Aug-99 11:15 ET
Waste Management Inc. (WMI) 23 3/8 -13/16: The chart is not pretty and the shares of this waste management company remain under pressure as the stock is not able to find any solid footing after last week's second earnings warning in less than a month. Last week, the company warned for the second time in a month that Q2 earnings would fall well short of the revised Wall Street estimates. Three weeks earlier, WMI lowered expectations by 9% to 14% due to lower than anticipated North America solid waste revenues. Last week's profit warning caused the stock to lose 17.5% of its value to 25 15/16 as the company said that higher interest expense, the status of some landfill deposit accounts, and delays in accounting changes would hurt operations. While the company has repeatedly assured investors that the problems that have plagued the company would be quickly fixed, management has not been able to get its house in order, each time further eroding the little credibility that it holds. Lack of management accountability is one of the main reasons the stock continues to drift lower today and is the anvil that hangs around the board's neck. By now, most institutional players should have dumped the stock if they dare admit that they still owned it after several operational miscues. It is the professional investor that has been the most supportive of the stock, always buying shortly after the company issued a warning to only be blind-sided again. This time around, it seems that institutional players have run out of patience with management as the latest earnings guidance provides little comfort when the stock is down more than 60% from a recent high of 59 reached in early May. This is very much a broken stock and it will take more than one or two earning reports to again generate interest in the stock. Given management's less than stellar track record, it could be a long wait. - RN
29-Jul-99 09:28 ET
Waste Management (WMI) 31 7/16 closed: This global leader in waste management services is making headlines again today, and proving that the more things change, the more they stay the same. About three weeks ago, shares of WMI took an absolute beating, plummeting 37% on July 7 in the wake of a disconcerting earnings warning from the company. Citing lower than anticipated North America solid waste revenues, Waste Management said it expected earnings to fall in the $0.67-$0.70 range, well shy of the $0.78 that had been forecasted by analysts given previous guidance from the company. Well, even WMI's revised outlook proved too optimistic as the company is now warning Q2 earnings should be somwhere between $0.58 and $0.60 per share due in part to higher interest expense, the status of some landfill deposit accounts, delays in accounting changes, yada, yada, yada. Can you say credibility issue? Coincidentally, Waste Management's CFO resigned his position, but will reportedly remain with the company. Hope he likes the heat, because it's awfully warm on the back of those garbage trucks this time of year. Speaking of heat, investors and analysts alike are hot about the latest guidance as shares of WMI are indicated 5 points lower on Instinet. Would suspect the analyst at CS First Boston is the hottest of them all as he actually upgraded WMI from "hold" to "buy" on July 14 when WMI was at 35 7/8. Hoping to diminish the negative impact of its warning, WMI also said it was considering a major share repurchase plan as well as the sale of core and non-core properties. In addition, the company announced it is cancelling its defined benefit pension plan and will incur a $215 mln termination charge to do so, but has not determined in which quarter to record the charge. Regardless, it is apparent that management doesn't have a good grasp of its business at this time. While the twice-lowered earnings expectations would still be a 41% improvement over the yr-ago period, there isn't much faith in the company's guidance at this juncture. Accordingly, a credibility discount is going to be applied to the stock price today, and until that issue is cleared up, this is a stock that is likely to remain in the dumps. - PJO
Investors pick up the trash
WMI's earnings report kick-starts cyber-buzz
By Shawn Langlois, CBS MarketWatch
Last Update: 4:08 PM ET May 11, 2000 NewsWatch
SAN FRANCISCO (CBS.MW) ? As if you didn't already know ... something stinks on Wall Street.
Apparently, that's just how Waste Management likes it.
While the Nasdaq stretched the rubber band to gaudy levels earlier this year, shares of the waste-disposal giant (WMI: news, msgs) were caught in a vicious compactor, getting shredded to the tune of nearly 80 percent off their 52-week high of 57 3/8.
But now that the stock market has snapped back to stench-ridden reality, message board lurkers -- normally partial to the sexier tech sector -- have started to fill up the one-time deserted WMI boards.
Why the sudden buzz? Try a 25 percent gain Thursday, to 18 3/4 in recent trading, on the heels of a very bullish earnings report.
And A. Maurice Myers, the Houston-based company's chairman, president and CEO, got several votes of confidence. But I'll let the Net surfers tell you themselves.
Thumbs up as interest-rate play
We're back in favor, according to SkeyDude on Yahoo: "WMI is worth more than 18 bucks ... Myers (CEO) knows how to make a buck, and earn back respect. This is going to be in an up trend for some time. Nothing but good news now."
HowShrewd exuded plenty of confidence: "Who says patience isn't ultimately rewarded? What a sweet release. Let all the analysts keep their market-perform ratings on the stock at $16-17. They'll all change to strong buys once it's $30, when I'll have my double. The big surprise here was revenue growth of +5 percent. This cash cow just grew bigger udders."
Over on Raging Bull, TiredGMan saw a boom after some much-needed improvement: "The leaders who led this great stock to tumble are now out. Now WMI needs to cleanse the middle management ranks, who sorely lack motivation. Once, the pensions that have been terminated are paid to the employees, there will be an upward surge in morale! This will bring productivity up and we're back in business. Eventually the stock will see pre-merger levels of $50+ a share."
And WillyPx52 echoed TiredGMan's sentiment: "This new management team means business and they have cleaned out much of the residue from the previous group. I think Meyers is the type of CEO who will try to remain off the radar scope and let the numbers speak for themselves. Look for this new team to continue to upgrade the management info systems and improve the operating margins to the industry levels. Congratulations to the new team and looking for a six/eight month target of $32."
With the Federal Reserve's meeting right around the corner and higher interest rates in the wings, RapCat liked what he saw: "Revenues increasing, asset sales continuing, cash flow strong, debt being repaid, new credible management, accounting systems stabilizing, people still need to have garbage picked up. Let's face it, Greenspan cannot reduce WMI's service demand, but he sure as hell can reduce the demand for high-tech products, and he will. Great defensive position."
Clearly, the best offense is a good defense in the current market climate. According to the most bullish of bulls, WMI is one of the few certainties in this increasingly uncertain stock market. To be sure, there's still plenty of making up to do, but if the message boards are any indication, Thursday's move was just the beginning for the new-and-improved Waste Management story.
Numbers
Revs 3,070.6M to 3,334.6M to 3,395.1M to 3,336.4M to 3,217.3M Mar00
EPS 0.58 to 0.50 to (1.53) to (0.19) to 0.09 Mar00 per Hoovers
EPS 0.49a to 0.58a to 0.61a to 0.58 to 0.44a to 0.32a to 0.26a Mar00. Briefing.com
52-Week Low on 16-Mar-2000 $13.00
Recent Price $19.188
52-Week High on 21-June-1999 $57.375
Market Capitalization $11.9B
Shares Outstanding 619.9M
Float 496.0M
Annual Dividend (indicated) $0.01
Dividend Yield 0.05%
Price/Book (mrq*) 2.70
Price/Earnings N/A
Price/Sales (ttm) 0.90
Institutional holdings is 70-80% for last four quarter which is surprising considering the bloodletting.
No insider selling in 2000.
Chart
Gapped up on Thursday after earnings Wednesday.
200/10/50 day stack and will probably cross it fast.
MACD positive since March 25. Biggest days last three months were last two and they were both green.
Summary
Well, I'm not impressed by the prodigal son return to profitability after a year in squallor. I want one more quarter to see if it is not a fluke. In Illinois, they have spawned a cottage industry of independents with their 1-5 garbage trucks taking restaurants trash to the local dump rather than pay the WMI high fees. I think $20 is a fair value and $26 would be a fair price by year's end of EPS continues on the upside. Of course, market is jumping in on future expectation so easy money has been made.
Jack |
