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Will This Analyst Upgrade Help Waste Management (WM) Stock Today?

Stocks in this article: WM

NEW YORK (TheStreet) -- Stifel Nicolaus upgraded Waste Management  (WM) to "buy" from "hold" and set a $55 price target. The firm said the company is cutting its workforce, but can continue to generate steady free cash flow.

The stock was up 0.49% to $46.80 in pre-market trading Wednesday.

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Separately, TheStreet Ratings team rates WASTE MANAGEMENT INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate WASTE MANAGEMENT INC (WM) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 4.2%. Since the same quarter one year prior, revenues slightly increased by 1.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has slightly increased to $555.00 million or 1.83% when compared to the same quarter last year. In addition, WASTE MANAGEMENT INC has also modestly surpassed the industry average cash flow growth rate of -5.58%.
  • 36.06% is the gross profit margin for WASTE MANAGEMENT INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, WM's net profit margin of 5.89% significantly trails the industry average.
  • WASTE MANAGEMENT INC's earnings per share declined by 13.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, WASTE MANAGEMENT INC reported lower earnings of $0.21 versus $1.76 in the prior year. This year, the market expects an improvement in earnings ($2.36 versus $0.21).
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: WM Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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