HOUSTON (AP) ¿ Waste Management Inc., the nation's No. 1 waste hauler, reports earnings for the first quarter before the market opens Wednesday. The following is a summary of key developments and analyst opinion related to the period. OVERVIEW: The Houston-based company expects a weak first quarter. With building activity down sharply, construction companies are carting off less trash from work sites. And as people shop and eat out less, restaurants and small businesses are generating less garbage, requiring fewer trash pickups. Waste Management's recycling business is also taking a hit as prices for paper, newsprint, metals and other recycled materials fall with demand. The company is responding by cutting costs. A restructuring plan intended to save more than $100 million a year will consolidate operations, delay merit-based pay for hourly workers until June 30 and eliminate salary increases for some employees this year until the economy improves. Waste Management also is keeping its prices up as trash volumes fall. BY THE NUMBERS. Analysts expect earnings of 41 cents per share on revenue of $2.98 billion for the quarter. That would be down from 48 cents per share on revenue of $3.27 billion in the first quarter of 2008.
ANALYST TAKE: "Until you see the economy, housing, new construction picking up, you're still going to see soft volume," Standard & Poor's analyst Stewart Scharf said in an interview with the AP. Scharf said waste haulers won't feel the full brunt of the economic downturn like other industries, such as consumer goods and retail, because people still must dispose of basic daily waste. "It's recession-resistant, but not recession-proof," he said. WHAT'S AHEAD: The company expects a weak first quarter. Chief Financial Officer Robert G. Simpson said in February that Waste Management will not provide specific guidance "until we see how the year is going." The economy should turn up by the end of the year, "but the recent volatility makes it difficult to estimate the timing of the improvement," he said. Waste Management expects to spend $730 million on acquisitions, stock repurchases and debt reduction, Lawrence O'Donnell III, president and chief operating officer, said at an investor analyst meeting last month.
"We think this year should provide some good opportunities for us to acquire some new businesses," he said, nothing that one area of interest is landfill gas-to-energy plants. Analyst Michael E. Hoffman of Wunderlich Securities said in a note to investors last month that Waste Management is in a good position to acquire new properties. "In the current market of depressed valuations, WMI has the opportunity to use its stable cash flow and balance sheet capacity to acquire waste collection, disposal and waste-to-energy assets at very attractive multiples," he said. Waste Management last year tried unsuccessfully to buy rival trash hauler Republic Services Inc. in a move widely seen as an attempt to derail Republic Services' bid for Allied Waste Industries Inc. Shareholders of Republic Services and Allied Waste Industries approved a merger in November creating the second-largest U.S. trash-hauling company and a larger competitor to Waste Management. STOCK PERFORMANCE: Shares fell 23 percent during the quarter ended March 31. That's a steeper decline than the 14 percent drop in the Standard & Poor's index for the January-to-March period. Share traded between $33.38 and $25.60.
Wunderlich's Hoffman said share prices for waste haulers fell as investors worried they wouldn't succeed in raising prices enough to offset lower volumes of trash collected.