Waste Management (WM) has been on our radar for all of 2017 and the first part of 2018. Looking at the full year, 2017 was exceptional for Waste Management as the company continued to focus on improving core price, adding profitable volume in a disciplined manner, and controlling costs. This led to the best year in the company’s history. Let us discuss.

Financial Highlights

For the full year 2017, the Company reported revenues of $14.5 billion, compared with $13.6 billion for 2016. Earnings per diluted share were $4.41 for the full year 2017 compared with $2.65 for the full year 2016. On an as-adjusted basis, earnings per diluted share were $3.22 for the full year 2017 versus $2.91 for the full year 2016.

In the fourth quarter, overall revenue increased by 5.5%, or $192 million, from the same period in the prior year. The revenue growth was driven by strong yield and volume growth in the Company’s collection and disposal business, which contributed $172 million of the increase. For the full year 2017, overall revenue increased by 6.4%, or $876 million. Yield and volume growth in the company’s collection and disposal business increased revenue by $536 million. Though revenue from the company’s recycling yield and volume declined by $25 million on a year-over-year basis in the fourth quarter of 2017, full-year recycling yield and volume contributed $231 million of revenue growth.

Internal revenue growth from yield for collection and disposal operations was 2.2% for the fourth quarter and 2.0% for the full year.

Solid waste

Traditional solid waste internal revenue growth from volume was 4.2% in the fourth quarter of 2017, or 5.0% on a workday adjusted basis. Total company internal revenue growth from volume, which includes our recycling and other ancillary businesses, was 2.6% in the fourth quarter, or 3.4% on a workday adjusted basis. For the full year 2017, traditional solid waste internal revenue growth from volume was 2.7%, or 2.9% on a workday adjusted basis. Total company volume was 2.1% for the full year 2017, or 2.3% on a workday adjusted basis.

Recycling

Average recycling commodity prices at the xompany’s recycling facilities were approximately 8.1% lower in the fourth quarter of 2017 compared with the prior year period. Recycling volumes declined 4.8% in the fourth quarter. Results in the xompany’s recycling line of business declined by $0.03 per diluted share when compared to the fourth quarter of 2016. For the full year, average recycling commodity prices at the xompany’s recycling facilities were approximately 27.0% higher and volumes decreased 0.5%. The revenue increase, combined with reduced operating costs at the Company’s recycling facilities, drove an almost $0.09 increase in the company’s earnings per diluted share for the full year.

2018 expectations

We have strong expectations. Core price is expected to be 4.0% or greater for 2018. Internal revenue growth from yield on the collection and disposal business is expected to be 2.0% or greater. Internal revenue growth from volume is expected to be between 2.0% and 2.2%.

In terms of recycling, with continued commodity pricing pressure and expected cost increases from efforts to reduce contamination, earnings from the Company’s recycling operations are expected to decline from the record-high levels it saw in 2017. The xompany currently expects earnings from its recycling business to decline between $0.08 and $0.10 per diluted share in 2018 when compared with the prior year, with much of the decline expected in the first half of 2018.

Finally, adjusted earnings per diluted share for 2018 is expected to be between $3.97 and $4.05, including an anticipated $0.62 earnings per diluted share benefit from tax reform partially offset by an $0.11 earnings per diluted share impact from the previously announced retention bonus for employees.

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