Shares of Waste Connections, a Canadian waste services company, fell 4% on Thursday morning after announcing $15 million in unforeseen challenges in the third quarter. The company also warned that it may encounter more obstacles in the fourth quarter.
As of 9:54 a.m. ET, shares of Waste Connections were trading at 181.93 Canadian dollars ($131.86) on the Toronto Stock Exchange, reflecting the decline.
Waste Connections revealed late Wednesday that it had incurred $15 million in unforeseen headwinds during the quarter. These challenges included high risk-related expenses, lingering effects of higher employee turnover from previous periods, and site-specific incremental operating expenses at one of the company’s landfills in California.
Ronald Mittelstaedt, Chief Executive of Waste Connections, acknowledged the company’s ability to navigate these hurdles successfully. However, he highlighted that the potential impacts from the evolving landfill situation in California, as well as a recent development at a landfill in Texas, were not anticipated in the full-year outlook provided in August.
The company is currently evaluating these expansions and their implications for the fourth quarter and beyond.
Waste Connection Expects Impact on Q4 Results, but Remains Optimistic
Waste Connection, a leading Canadian waste services company, is anticipating some uncertainty in the coming quarter but remains optimistic about its outlook. According to the management, the range of outcomes for the next quarter could include costs of $20 million affecting revenue, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), as well as adjusted free cash flow.
An analysis by RBC’s Walter Spracklin revealed that the impacts from the Seabreeze landfill in Texas are primarily attributed to slope failure. The estimated cost for rectifying this issue is expected to range between $5 million and $10 million. However, these costs will only impact the fourth quarter results.
In addition to the challenges at the Seabreeze landfill, Waste Connection is also addressing odor mitigation and incremental leachate treatment at the Chiquita Canyon in California. This undertaking is projected to cost approximately $10 million.
Despite these setbacks, Walter Spracklin remains cautiously optimistic. While he acknowledges that the impacts are relatively minimal, he does caution that they have the potential to lower results below full-year guidance.
In the third quarter, Waste Connection reported increased revenue of $2.06 billion, a rise from $1.88 billion in the same period last year, which is consistent with analyst expectations according to a poll conducted by FactSet.
Although there was a slight dip in net income from $236.9 million to $229 million, or 89 cents per share down from 92 cents per share, earnings on an adjusted basis showed positive growth. Adjusted earnings per share rose to $1.17, surpassing expectations of an increase to $1.13 per share from $1.10 per share.