Waste Management, Inc. (WM) Earnings Show That Boring Is Beautiful

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A change is gonna come
It’s not all bad news forever. Waste Management can expect some big growth catalysts that I regard as basically inevitable. First, a continuing economic recovery should lead to more consumption, which in turn leads to higher waste volumes and better pricing for the company as households and municipalities get their budgets in order. Second, increased activity in the housing market will generate much higher volumes for construction waste and special waste. Finally, the eventual expiration of current commodities and electricity contracts and their renewal at more favorable prices should turn Waste Management’s recycling and waste-to-energy operations from the big drain on earnings they are now to a solid contributor to profitability.

All three opportunities basically just depend on continued economic recovery, even if modest, and all three should create a lot of value for shareholders. Given the likelihood of these developments, shares look undervalued today, probably because while it’s fairly certain that the economy will recover fully, it’s entirely uncertain when that will happen. It’s true that management offered modest guidance for 2013, and will still be pursuing its reorganization strategy in 2014. A lull in the recovery could set the company’s plans back a year or more, leading to a scenario in which Waste Management’s stock price doesn’t move for years.

The article Waste Management Earnings Show That Boring Is Beautiful originally appeared on Fool.com and is written by Daniel Ferry.

Fool contributor Daniel Ferry owns shares of Waste Management. The Motley Fool recommends Waste Management. The Motley Fool owns shares of Waste Management.

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