Waste Connections Inc. (TSX: WCN)(NYSE: WCN), one of the largest integrated solid waste services companies in Canada and the United States, released its fiscal 2017 fourth-quarter and full-year earnings results after the market closed on Wednesday, and its stock responded by falling 0.55% in Thursday’s trading session. Let’s break down the earnings results and the fundamentals of its stock to determine if we should be long-term buyers today.
The impressive earnings results
Here’s a quick breakdown of five of the most notable statistics from Waste Connections’s three-month period ended on December 31, 2017, compared with the same period in 2016:
| Metric | Q4 2017 | Q4 2016 | Change |
| Total Revenue | US$1,157.18 million | US$1,048.62 million | 10.4% |
| Adjusted EBITDA | US$360.70 million | US$325.45 million | 10.8% |
| Adjusted net income | US$137.05 million | US$120.29 million | 13.9% |
| Adjusted net income per share (EPS) | US$0.52 | US$0.46 | 13.0% |
| Adjusted free cash flow | US$149.86 million | US$110.68 million | 35.4% |
And here’s a quick breakdown of five notable statistics from Waste Connections’s 12-month period ended on December 31, 2017, compared with the same period in 2016:
| Metric | Fiscal 2017 | Fiscal 2016 | Change |
| Total Revenue | US$4,630.49 million | US$3,375.86 million | 37.2% |
| Adjusted EBITDA | US$1,460.53 million | US$1,071.09 million | 36.4% |
| Adjusted net income | US$570.67 million | US$395.18 million | 44.4% |
| Adjusted EPS | US$2.16 | US$1.71 | 26.3% |
| Adjusted free cash flow | US$763.89 million | US$550.94 million | 38.7% |
Outlook on 2018
In the press release, Waste Connections provided its outlook on fiscal 2018; here’s a breakdown of what the company expects to accomplish:
- Revenues of approximately US$4.825 billion
- Net income of approximately US$570 million
- Adjusted EBITDA of approximately US$1.55 billion, or approximately 32.1% of revenue
- Net cash provided by operating activities of approximately US$1.35 billion, or approximately 28.0% of revenue
- Adjusted free cash flow of approximately US$850 million, or approximately 17.6% of revenue
Is now the time to buy?
Waste Connections’s fourth quarter was outstanding, and it capped off a year to remember, as it achieved double-digit percentage growth across all of its key financial metrics; its outlook on 2018 is also very positive, so I think its stock should have responded by soaring, and I think it represents a very attractive long-term investment opportunity today for two fundamental reasons.
First, it’s undervalued based on its growth. Waste Connections’s stock currently trades at 31.9 times fiscal 2017’s adjusted EPS of US$2.16 and 28.8 times the consensus EPS estimate of US$2.40 for fiscal 2018, which may seem a bit rich at first glance, but I actually think they are attractive given its aforementioned double-digit growth rates and its estimated 10% long-term earnings-growth rate.
Second, it’s an under-the-radar dividend-growth superstar. Waste Connections currently pays a quarterly dividend of US$0.14 per share, equating to US$0.56 per share annually, which gives it a 0.8% yield; a 0.8% yield isn’t high by any means, but it’s of the utmost importance to note that the waste solutions provider’s 16.7% dividend hike in November has it on track for 2018 to mark the eighth straight year in which it has raised its annual dividend payment, and I think its very strong growth of free cash flow will allow this streak to continue for the foreseeable future.
With all of the information provided above in mind, I think all Foolish investors should consider establishing long-term positions in Waste Connections today.
