Parsing Results for 2 Holdings Ahead of Earnings Calls
Here's what we're watching for as two portfolio names hold their earnings calls today.
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*Waste Management reported a minuscule June quarter miss, leading the shares to trade off and here’s what we’re listening for on this morning’s earnings call
*United Rentals delivered a positive EPS surprise for the June quarter, but we still want to know how Hurricane Beryl impacts the current quarter
After reporting June quarter earnings on Wednesday night, shares of Waste Management WM and United Rentals URI are both under pressure ahead of their respective earnings conference calls at 10 a.m. ET and 11 a.m. ET on Thursday. Let’s review what we found in the earnings press releases and set out our game plan for these two stocks.
Waste Management
The pressure on Waste Management shares stems from the company narrowly missing top- and bottom-line consensus expectations following the sharp run-up in the shares over the last few weeks. To us, while the market may be overly focused on the minuscule misses (just one penny on the EPS line), the story to focus on is the continued margin improvement. Waste’s June quarter operating margin climbed to 30.0% for the quarter, up from 28.7% in the year-ago one and 29.6% in the March quarter. To us, this speaks to the combination of pricing power and the expanded use of automated trucks across its footprint. The market is also missing the upward revision to Waste’s targeted EBITDA margin for this year to $29.7% to 30.2%, up from its prior forecast of 29.0% to 29.4%.
Alongside the earnings press release, Waste provided some materials for its pending acquisition of Stericycle SRCL. This means management will be discussing its plans on the earnings call and we’ll want to hear its plans for boosting margins at Stericycle. As we understand those plans and what the overall margin improvement prospects are for the Waste-Stericycle combination, we’ll plot our next move with WM shares. The overreaction we are seeing in the shares this morning has us inclined to take advantage of it, but we will have to factor management’s Stericycle comments into the equation.
We will also be listening to how Hurricane Beryl may benefit its business in the current quarter. Natural disasters tend to wreak near-term havoc, but post-event clean up and rebuilding also bring opportunities. Ahead of the call, our price target remains $230, but we’ll review that target based on the company’s 2H 2024 outlook and what we learn about Stericycle
United Rentals
Our move to ring the register on URI shares on Wednesday was a good one given the shares are still down from that trade level even though they have caught some footing this morning. United reported EPS of $10.70 per share, ahead of the $10.55 consensus forecast, on revenue that rose 6.2% year over year to match the $3.77 billion consensus forecast. Management tightened its top line and EBITDA outlook for this year with an upbeat tone.
Similar to our comments above for Waste, on United’s earnings call we’ll be listening for how Hurricane Beryl may impact its revenue and EPS cadence between the September and December quarters. We’ll also be listening for 2025 margin targets as we move deeper into infrastructure projects and United continues to integrate its recent Yak acquisition while squeezing more synergies out of its Ahern one completed at the tail end of 2022.
As we digest these conference call learnings, we’ll revisit our URI price target as needed.
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At the time of publication, TheStreet Pro Portfolio was long WM and URI.
