Waste Management (NYSE: WMI) really rocketed on Monday. Its shares closed up nearly 18% to a final price of $30.39. Volume was heavy. No doubt the company's preliminary earnings report helped get things going for the company that makes its money off ridding the world of trash.
For the third quarter, Waste Management is forecasting an increase in its top line of 3.6%. It should book revenues of $3.5 billion. For the bottom line, the company should do at least $0.62 per share, which is two pennies above Wall Street estimates. Even better, this represents a 15% improvement over last year's earning's performance. Not bad, I suppose, but was the 18% gain in the stock price truly reflective of an organic breakout? Keep in mind that the Dow rallied almost 1000 points on Monday. That obviously had a lot to do with the fantastic price appreciation. In addition, Tom Taulli covered how Waste Management dropped its bid for competitor Republic Services (NYSE: RSG). As Tom pointed out, Waste Management probably didn't want to rock the boat as far as its credit rating was concerned. So the traders probably also took this into consideration when placing their bids.
But why would I want to buy the stock now after its stellar one-day performance? I'd much rather take a look at the company after it pulls back. I'm just not convinced that all of the action in the stock was due to strong conviction on the part of investors. I'd have to watch how the price behaves over the next few days before making a decision. All of these bounces that we're going to inevitably see after suffering many days of hellish declines in the major indexes are to be approached with caution if you're looking for quick trading gains. Long-term investors can obviously have a different attitude going into certain stocks. In the case of Waste Management, I will give credit for its attractive yield. But you'll need to perform more due diligence beyond the yield to see if this is one you should look at or not.
Disclosure: I don't own any company mentioned; positions can change at any time.
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Reader Comments (Page 1 of 1)
10-14-2008 @ 5:28PM
Judy said...
I was a WM customer for 12 years. They told me to put the trash out before 7am on Wednesdays. The last time I did they came around long before 7am. When I called to have it picked up the customer service rep said if I could prove I was told that they would send a truck out to pick it up. Of course I couldn't prove it. But I could and did cancel the service. They still had to pick it up so they could get their trash can back. Never would I invest in a company that treats their customers so rudely. Thankfully we still have some choices in this country. I had new service long before they retrieved their can. Better service and cheaper as well.