Waste Connections (TSX:WCN) announced its quarterly financial results after the market closing bell on February 13, which seemingly impressed investors and led to a rally in its share prices. A day after its earnings came out, WCN stock jumped nearly 5% to $222.18 per share, registering its biggest single-day gains in 15 months. In its latest earnings report, the company also provided the 2024 outlook. Before looking at its 2024 guidance and what it could mean for investors, let’s take a closer look at its fourth-quarter and full-year 2023 financial results.
Waste Connections’s fourth-quarter earnings
If you don’t know it already, Waste Connections is a Woodbridge-headquartered firm with a market cap of $57.1 billion, as its stock trades at 12.3% year-to-date gains. The company primarily focuses on providing integrated solid waste services, including non-hazardous waste collection, transfer, and disposal.
In the December quarter, Waste Connections’s total revenue rose 8.9% YoY (year over year) to US$2.04 billion with the help of an improvement in its commodity-driven revenues. The solid waste organic growth also drove its adjusted quarterly earnings up by 24.7% from a year ago to US$1.11 per share, managing to exceed Street analysts’ expectation of US$1.09 per share by a narrow margin. More importantly, its adjusted net profit margin expanded to 14% last quarter compared to 12.3% a year ago.
With this, Waste Connections’s 2023 total revenue climbed 11.2% compared to the previous year to around US$8 billion. The company’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) during the year jumped 13.6% on a YoY basis to US$2.52 billion. Similarly, its adjusted annual earnings advanced by 9.7% YoY to US$4.19 per share.
These upbeat earnings and improved profitability could be the primary reasons why WCN stock popped by nearly 5% a day after its financial results came out.
Strong 2024 guidance
Encouraged by its strong 2023 results, its management projects a strong 2024 for Waste Connections, anticipating around US$8.75 billion in revenue and US$1.096 billion in net profit. The company’s adjusted EBITDA is expected to reach US$2.86 billion, with a margin of around 32.7%.
The management also forecasts US$2.35 billion in operating cash flow and plans US$1.15 billion in capital expenditures for 2024, including investments in renewable natural gas facilities. Moreover, its adjusted free cash flow is estimated at US$1.2 billion after taking into consideration capital spending.
Is WCN stock a buy in February 2024?
WCN stock has a strong track record of delivering positive returns to its shareholders, outperforming the TSX Composite benchmark by a huge margin in the past 10 years. While the stock has gone up by 479% in the last decade, the index rose by only around 49%.
The company has consistently grown its revenue, profits, and cash flow over the years while maintaining a healthy financial position. In the five years between 2018 and 2023, its revenue and adjusted earnings grew positively by 63% and 66%, respectively. Based on its impressive fundamentals and 2024 outlook, Waste Connections stock seems to be a good buy in February 2024 that has the potential to continue its upward journey in the years to come.
