HOUSTON (AP) _ Waste Management Inc.'s first-quarter income edged up just over 1 percent as an ongoing strategy to dump or reprice work with low profit margins offset decreased volumes and higher fuel costs.
The nation's largest garbage hauler and landfill operator said Tuesday it earned $241 million, or 48 cents per share, in the quarter ended March 31, compared with $238 million, or 45 cents, a year earlier. Revenue rose 2.5 percent to $3.27 billion.
Before one-time tax benefits, the company earned 47 cents per share. That compared with expectations of 46 cents per share on revenue of $3.2 billion, according to a survey of analysts polled by Thomson Financial. Those forecasts typically exclude one-time items.
"We've consistently followed our strategy to price our services to generate adequate returns on our investment, to fully recover our costs and to expand our operating margins," David Steiner, Waste Management's chief executive, said in a conference call with investors.
"Where we've lost volumes, we've focused on flexing down our operating costs," Steiner said, noting he expects the rate of decline in volume to moderate for the remainder of the year.
Waste Management began reviewing accounts for a variety of customers in 2006, trying to improve margins. The company hauls, disposes and recycles garbage for residential, commercial, industrial and municipal customers throughout North America. It also owns and operates landfills.
Steiner said the company overcame several challenges in the first three months of 2008, including sharply higher diesel fuel prices, a sluggish economy and harsh winter weather in the Midwest.
Fuel prices squeezed per-share earnings by about 1 cent in the quarter as revenue from fuel surcharges lagged the spike in diesel prices, which are near all-time highs.
The company said it benefited from higher recycling commodity prices for paper and metal.
In a research note, Goldman Sachs called Waste Management's results solid and said they highlight "the multiple levers the company can pull to generate returns in good times and bad."
"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, more importantly, solid cash flow that is aggressively being returned to shareholders," the investment bank said.
Looking ahead, Waste Management reiterated its 2008 earnings forecast of $2.19 to $2.23 a share. The current Wall Street forecast is for earnings of $2.22 a share.
Waste Management's shares rose 70 cents, or nearly 2 percent, to $36.07 in afternoon trading. They've traded between $27.57 and $41.19 in the past year.
AP Business Writer Mike Obel in New York contributed.
Copyright 2008 The Associated Press.