Waste Connections, Inc. (WCN) Bundle
Understanding Waste Connections, Inc. (WCN) Revenue Streams
Understanding Waste Connections, Inc.’s Revenue Streams
Revenue Breakdown
- Total revenues for the three months ended September 30, 2024, were $2.338 billion, an increase of 13.3% from $2.065 billion in the same period of 2023.
- Total revenues for the nine months ended September 30, 2024, were $6.659 billion, up 11.2% from $5.986 billion in 2023.
Revenue Contributions by Segment
| Segment | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | 9M 2024 Revenue (in millions) | 9M 2023 Revenue (in millions) |
|---|---|---|---|---|
| Western | $476.2 | $432.5 | $1.352 billion | $1.247 billion |
| Southern | $453.2 | $413.6 | $1.311 billion | $1.228 billion |
| Eastern | $407.7 | $353.1 | $1.154 billion | $1.026 billion |
| Central | $391.7 | $372.9 | $1.139 billion | $1.082 billion |
| Canada | $342.1 | $263.1 | $941.6 | $739.0 |
| MidSouth | $267.6 | $229.6 | $761.2 | $664.9 |
Year-over-Year Revenue Growth Rate
- Revenue growth for Q3 2024 was driven by price increases and contributions from acquisitions, totaling an increase of $273.7 million compared to Q3 2023.
- For the nine months ended September 30, 2024, price increases contributed $387.4 million to revenue growth.
Contribution of Different Business Segments to Overall Revenue
- Western segment contributed 20.3% to total revenues in Q3 2024.
- Southern segment contributed 19.4% to total revenues in Q3 2024.
- Eastern segment contributed 17.4% to total revenues in Q3 2024.
- Central segment contributed 16.8% to total revenues in Q3 2024.
- Canada segment contributed 14.6% to total revenues in Q3 2024.
- MidSouth segment contributed 11.4% to total revenues in Q3 2024.
Analysis of Significant Changes in Revenue Streams
- Revenue from sales of recyclable commodities increased by $19.2 million in Q3 2024 compared to Q3 2023.
- Contributions from acquisitions added $162.7 million to revenues for Q3 2024.
- Volume losses of $37.7 million were recognized in Q3 2024 due to lower residential collection volumes.
A Deep Dive into Waste Connections, Inc. (WCN) Profitability
A Deep Dive into Waste Connections, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was 31.8%, compared to 30.9% for the same period in 2023. The gross profit increased 11.2% year-over-year to $2.120 billion from $1.903 billion.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was 19.0%, an increase from 16.9% in 2023. The operating income rose 25.2% to $1.267 billion from $1.012 billion.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, stood at 12.2%, up from 10.6% in the previous year, with net income attributable to the company increasing to $813.6 million from $636.0 million.
Trends in Profitability Over Time
The following table illustrates the trends in profitability metrics over the last two years:
| Metric | 2024 (Nine Months) | 2023 (Nine Months) | Change (%) |
|---|---|---|---|
| Gross Profit Margin | 31.8% | 30.9% | 2.9% |
| Operating Profit Margin | 19.0% | 16.9% | 2.1% |
| Net Profit Margin | 12.2% | 10.6% | 1.6% |
Comparison of Profitability Ratios with Industry Averages
The following table compares Waste Connections' profitability ratios with industry averages:
| Metric | Waste Connections | Industry Average |
|---|---|---|
| Gross Profit Margin | 31.8% | 29.5% |
| Operating Profit Margin | 19.0% | 16.0% |
| Net Profit Margin | 12.2% | 10.0% |
Analysis of Operational Efficiency
Cost of operations as a percentage of revenues decreased to 58.1% for the nine months ended September 30, 2024, down from 59.3% in 2023. This reduction was primarily driven by:
- Price-led revenue growth.
- Increased revenues from landfill gas sales.
- Decreased fuel costs due to lower diesel and natural gas prices.
- Lower labor and disposal costs.
The following table summarizes the operational efficiency metrics:
| Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Cost of Operations (% of Revenue) | 58.1% | 59.3% | -1.2% |
| SG&A Expenses ($ millions) | $672.1 | $606.4 | 10.8% |
Overall, Waste Connections demonstrated a solid performance in profitability metrics, showcasing growth and efficiency improvements relative to prior periods and industry benchmarks.
Debt vs. Equity: How Waste Connections, Inc. (WCN) Finances Its Growth
Debt vs. Equity: How Waste Connections, Inc. Finances Its Growth
As of September 30, 2024, Waste Connections, Inc. reported total liabilities of $11.83 billion and total equity amounting to $8.26 billion. The company's debt structure includes both long-term and short-term elements, critical for understanding its financial health.
Overview of the Company's Debt Levels
Waste Connections, Inc. has both long-term and short-term debt. The total long-term debt stands at approximately $9.77 billion, while short-term debt is reported at $1.08 billion. This structure indicates a significant reliance on long-term financing to support its operations and growth initiatives.
Debt-to-Equity Ratio and Comparison to Industry Standards
The company's debt-to-equity ratio is calculated at approximately 1.43 as of September 30, 2024, which is above the industry average of around 1.20 for waste management companies. This higher ratio suggests a more aggressive use of debt in financing its growth compared to its peers, which could imply higher financial risk but potentially greater returns if managed effectively.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In March 2024, Waste Connections issued $750 million of senior unsecured notes, leading to an increase in interest expense by $9.3 million. Additionally, in June 2024, the company issued CAD $500 million in senior unsecured notes. As of September 2024, Waste Connections holds a credit rating of Baa3 from Moody’s and BBB- from S&P, indicating a stable outlook but with moderate risk.
Balancing Debt Financing and Equity Funding
Waste Connections balances its financing strategies by utilizing both debt and equity. For the nine months ending September 30, 2024, the company generated $1.66 billion in net cash from operating activities, which supports its ability to service debt. The equity financing is supported by retained earnings, which totaled $4.73 billion. This balance enables the company to invest in growth while maintaining a manageable level of financial leverage.
| Debt Type | Amount (in billions) |
|---|---|
| Long-term Debt | $9.77 |
| Short-term Debt | $1.08 |
| Total Liabilities | $11.83 |
| Total Equity | $8.26 |
| Debt-to-Equity Ratio | 1.43 |
Assessing Waste Connections, Inc. (WCN) Liquidity
Assessing Waste Connections, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 0.89, indicating that current liabilities exceed current assets.
Quick Ratio: The quick ratio stands at 0.57, suggesting limited liquidity when excluding inventory from current assets.
Analysis of Working Capital Trends
At September 30, 2024, the company reported a working capital deficit of $398.9 million, reflecting a decline from the previous period due to increased current liabilities driven by acquisitions and operational expenses.
Cash Flow Statements Overview
| Cash Flow Category | 2024 (Nine Months) | 2023 (Nine Months) |
|---|---|---|
| Net Cash Provided by Operating Activities | $1,659,998 | $1,570,876 |
| Net Cash Used in Investing Activities | ($2,645,810) | ($1,185,613) |
| Net Cash Provided by Financing Activities | $1,040,357 | ($366,536) |
| Cash at End of Period | $238,508 | $199,031 |
Net cash provided by operating activities increased by $89.1 million compared to the same period in 2023, driven by higher earnings from operations, which were partially offset by increased payments for closure and post-closure activities.
Potential Liquidity Concerns or Strengths
Despite the increase in operating cash flow, the significant cash outflows related to investing activities, particularly for acquisitions, raise concerns about sustained liquidity. The company’s reliance on financing activities to offset cash used in investing suggests a potential vulnerability in managing cash flows effectively.
Overall, the combination of low liquidity ratios and a working capital deficit highlights the need for careful cash management moving forward.
Is Waste Connections, Inc. (WCN) Overvalued or Undervalued?
Valuation Analysis
In evaluating the valuation of Waste Connections, Inc. (WCN), we will analyze key financial ratios including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios. Additionally, we will look at stock price trends, dividend yield and payout ratios, and analyst consensus on stock valuation.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, Waste Connections had a diluted earnings per share (EPS) of $3.15. With a stock price of approximately $168.00, the P/E ratio is calculated as follows:
- P/E Ratio = Stock Price / EPS
- P/E Ratio = $168.00 / $3.15 ≈ 53.33
Price-to-Book (P/B) Ratio
The company's book value per share is reported at $23.00. Therefore, the P/B ratio can be calculated as:
- P/B Ratio = Stock Price / Book Value per Share
- P/B Ratio = $168.00 / $23.00 ≈ 7.30
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated based on market capitalization and net debt. As of September 30, 2024, the company's total debt is $3.5 billion and cash equivalents are $1.2 billion. The market capitalization is approximately $30 billion.
- Enterprise Value = Market Cap + Total Debt - Cash
- Enterprise Value = $30 billion + $3.5 billion - $1.2 billion = $32.3 billion
EBITDA for the trailing twelve months is approximately $2.2 billion. Thus, the EV/EBITDA ratio is:
- EV/EBITDA = Enterprise Value / EBITDA
- EV/EBITDA = $32.3 billion / $2.2 billion ≈ 14.73
Stock Price Trends
Over the last twelve months, the stock price has shown significant volatility. Starting at approximately $145.00 in October 2023, the price peaked at around $175.00 in July 2024 before stabilizing around $168.00.
Dividend Yield and Payout Ratios
The company has increased its quarterly dividend to $0.315 per share. Given the current stock price of $168.00, the dividend yield is calculated as follows:
- Dividend Yield = Annual Dividend / Stock Price
- Dividend Yield = ($0.315 4) / $168.00 ≈ 0.75%
The payout ratio can be calculated using the EPS:
- Payout Ratio = Annual Dividend / EPS
- Payout Ratio = ($0.315 4) / $3.15 ≈ 0.40 or 40%
Analyst Consensus on Stock Valuation
As of the latest reports, the consensus among analysts is predominantly a "Hold" rating, with a few "Buy" recommendations. The average target price is around $170.00.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 53.33 |
| P/B Ratio | 7.30 |
| EV/EBITDA Ratio | 14.73 |
| Dividend Yield | 0.75% |
| Payout Ratio | 40% |
| Analyst Consensus | Hold |
Key Risks Facing Waste Connections, Inc. (WCN)
Key Risks Facing Waste Connections, Inc.
The financial health of Waste Connections, Inc. is influenced by various internal and external risk factors. Here are some critical areas of concern:
Industry Competition
Competition within the waste management industry is intense. The company faces pressure from both large national firms and smaller regional operators, which can impact market share and pricing strategies. In the latest quarter, revenues increased by $273.7 million, or 13.3%, to $2.338 billion compared to the same period in the previous year. However, the competitive landscape necessitates continuous innovation and efficiency improvements to maintain growth.
Regulatory Changes
Waste management is heavily regulated at both federal and state levels. Changes in environmental regulations can lead to increased operational costs. For example, compliance with new waste disposal regulations can incur significant costs. The company recognized $4.7 million in higher risk management expenses during the latest quarter due to increased claims and premium costs.
Market Conditions
Fluctuations in commodity prices, particularly for recyclable materials, can significantly impact revenues. Revenues from sales of recyclable commodities increased by $19.2 million and $49.8 million for the three and nine months ended September 30, 2024, respectively. However, a decrease in average commodity pricing could adversely affect profitability.
Operational Risks
Operationally, the company has faced volume losses totaling $37.7 million in the latest quarter due to the shedding of low-margin municipal contracts. This strategic decision, while aimed at improving margins, carries risks related to customer retention and service continuity.
Financial Risks
Financially, the company has seen an increase in operating costs, which rose by $318.0 million, or 9.0%, to $3.867 billion for the nine months ended September 30, 2024. Key contributors include higher labor costs and increased disposal expenses, which may affect future profit margins.
Strategic Risks
Strategically, the company’s growth is partially dependent on acquisitions. While acquisitions contributed $162.7 million to revenues in the latest quarter, they also introduce integration risks and potential misalignment with operational goals. The company reported an increase in direct acquisition expenses, reflecting the costs associated with these growth strategies.
Mitigation Strategies
To mitigate these risks, Waste Connections focuses on optimizing operational efficiencies and enhancing service offerings. The company has implemented strategies to manage costs effectively, which include:
- Investing in technology to streamline operations and reduce waste processing costs.
- Adjusting pricing structures in response to market conditions to safeguard margins.
- Continuously engaging with regulatory bodies to stay ahead of compliance requirements.
| Risk Factor | Impact | Recent Financial Data |
|---|---|---|
| Industry Competition | Market Share Pressure | Revenues increased by $273.7 million (13.3%) to $2.338 billion |
| Regulatory Changes | Increased Compliance Costs | Risk management expenses increased by $4.7 million |
| Market Conditions | Commodity Price Fluctuations | Revenues from recyclables increased by $19.2 million (Q3) and $49.8 million (YTD) |
| Operational Risks | Volume Losses | Volume losses totaled $37.7 million |
| Financial Risks | Increased Operating Costs | Operating costs increased by $318.0 million (9.0%) |
| Strategic Risks | Integration Challenges | Acquisitions contributed $162.7 million to revenues |
Future Growth Prospects for Waste Connections, Inc. (WCN)
Future Growth Prospects for Waste Connections, Inc.
Analysis of Key Growth Drivers
Waste Connections, Inc. has identified several key growth drivers that are expected to enhance its market position and financial performance in the coming years. These include:
- Product Innovations: The company is focusing on enhancing its recycling capabilities and expanding its renewable energy initiatives, particularly through landfill gas recovery.
- Market Expansions: Strategic expansions into new geographic markets, particularly in the Southern and Eastern United States, are anticipated to drive growth.
- Acquisitions: The company has a robust acquisition strategy aimed at integrating smaller waste management firms to increase market share and operational efficiency. In 2024, acquisitions contributed approximately $366.7 million to revenues for the nine months ended September 30.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, Waste Connections reported total revenues of $6.659 billion, reflecting an increase of 11.2% from $5.986 billion in the same period in 2023. The company expects continued revenue growth, driven by:
- A projected annual revenue growth rate of 6% to 8% over the next five years.
- Increased pricing power, with net price increases of $387.4 million recognized in the nine months ended September 30, 2024.
Strategic Initiatives or Partnerships That May Drive Future Growth
Waste Connections is actively pursuing strategic partnerships and initiatives, including:
- Joint Ventures: Collaborations with renewable energy firms to enhance landfill gas recovery systems.
- Technology Investments: Investments in technology to optimize waste collection routes and improve recycling processes, potentially reducing operational costs by 5% to 10%.
Competitive Advantages That Position the Company for Growth
Waste Connections holds several competitive advantages, including:
- Strong Brand Recognition: Established reputation in the waste management industry, particularly in North America.
- Operational Efficiency: High EBITDA margins, with a margin of 31.4% for the nine months ended September 30, 2024.
- Diverse Service Portfolio: A broad range of services including solid waste collection, recycling, and E&P waste services, which helps mitigate risks associated with market fluctuations.
Financial Overview Table
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenues | $2.338 billion | $2.065 billion | 13.3% |
| Net Income | $308.0 million | $229.2 million | 34.3% |
| EBITDA | $411.3 million | $384.7 million | 6.9% |
| Operating Income Margin | 20.3% | 17.1% | 3.2% |
Overall, Waste Connections is well-positioned for future growth, supported by strategic initiatives, operational efficiencies, and a strong market presence that continues to attract investors.
Waste Connections, Inc. (WCN) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Waste Connections, Inc. (WCN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Waste Connections, Inc. (WCN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Waste Connections, Inc. (WCN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.