HOUSTON - Waste Management Inc., the nation's largest garbage hauler, said Wednesday its fourth-quarter profit rose 26 percent on tax benefits and the sale of some operations, though higher fuel prices cut into income.
The company said earnings rose to $309 million, or 61 cents per share, in the three months ended Dec. 31 versus $246 million, or 46 cents per share, a year earlier.
Revenue increased to $3.36 billion from $3.28 billion in the year-ago period.
"The fourth quarter of 2007 was not without its challenges, including the impact of rising diesel fuel prices," said David Steiner, Waste Management's chief executive.
Still, Steiner added, "We ended the year on a strong note and are poised for additional earnings growth in 2008."
Excluding special items, profit for the October-December period was $276 million, or 54 cents per share. That still beat Wall Street expectations of 51 cents per share, according to Thomson Financial.
A lower tax rate in Canada and the divestiture of underperforming businesses boosted profits. That was partially offset by lower volumes, as the housing market slumped further, and by California labor disruptions.
Its shares rose 91 cents, or 2.8 percent, to $34.04. They've traded in a range of $27.57 to $41.19 in the past year.
Waste Management has spent recent quarters reviewing low-margin accounts and either raising prices for them or eliminating them altogether, a strategy largely applauded by analysts. The company has said its plan to price jobs better to improve margins has worked well.
Steiner said the company's 2.4 percent increase in quarterly revenue was due mainly to its "disciplined approach to pricing" and the strength of recycling commodity prices. Volume was off 3.8 percent, primarily in trash collection.
In a note to investors, Goldman Sachs called the results solid and said Waste Management has begun to see the benefits of its pricing initiatives.
"Even in an environment where volumes continue to drop off (partly from less housing construction), WMI is still able to generate strong earnings growth and, as importantly, solid cash flow that is aggressively being returned to shareholders," Goldman Sachs said.
Looking ahead, Waste Management forecast 2008 earnings will increase to a range of $2.19 to $2.23 a share. The current Wall Street estimate is for earnings of $2.21 a share.
The company said its capital expenditures are expected to be about $1.5 billion this year, up from $1.2 billion in 2007. Waste Management said it will invest this year in its truck fleet and on renewable energy power plants.
For all of 2007, Waste Management said net income was $1.16 billion, or $2.23 a share, compared with $1.15 billion, or $2.10 a share, a year earlier. Full-year sales were roughly flat at $13.3 billion.
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