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These 2 Under-the-Radar Stocks Scored Solid Gains on Wall Street's Bad Day

Motley Fool - Wed Oct 25, 2023

Wall Street had a terrible day on Wednesday as investors reacted negatively on the whole to financial reports from key industry leaders. The Dow Jones Industrial Average (DJINDICES: ^DJI) held up reasonably well, but big losses for the Nasdaq Composite (NASDAQINDEX: ^IXIC) and S&P 500 (SNPINDEX: ^GSPC) showed how negative overall sentiment was.


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Data source: Yahoo! Finance.

Yet even with a gloomy mood among most investors, some stocks managed to post solid gains. Not everyone follows the trash business or the educational services and software industry, but both WM (NYSE: WM) and Stride (NYSE: LRN) released financial results that gave investors a lot to be happy about. Here are all the details.

WM turns trash into treasure

Shares of WM, formerly known as Waste Management, were up 6% on Wednesday. The company's third-quarter results showed just how reliable its business can be, regardless of broader economic conditions.

WM reported revenue of $5.2 billion, which was up 2.4% year over year. Adjusted net income of $664 million showed similarly modest growth of about 3%, and it produced adjusted earnings of $1.63 per share.

On the whole, WM dealt with some business headwinds fairly well. Core price, which measures price changes adjusting for certain other business metrics, came in at 6.6%, which was down from year-earlier levels but still exceeded inflationary cost increases by about a percentage point. Total volumes were up marginally from the year-ago period, but careful cost management led to more-favorable earnings trends. Free cash flow jumped $180 million to $612 million in the third quarter.

WM sees some of those favorable trends continuing, as it boosted its full-year estimates for free cash flow by $150 million to a new range of $1.825 billion to $1.925 billion. WM's stock has held up very well in recent years, defying the bear market and now returning to levels close to its all-time highs.

Stride graduates with honors

Shares of Stride did even better, jumping 18% on the day. The company formerly known as K12 reported record sales in its fiscal first quarter, ended Sept. 30, and it sees good times ahead as well.

Quarterly revenue came in at $480 million, up 13% year over year as general education and career learning enrollment had solid performance. The company reversed a year-ago loss with a modest profit of $4.9 million, which worked out to $0.11 per share.

Sales gains were biggest in the middle school and high school career-learning segment, rising more than 20% to offset slightly more sluggish results among adult students.

Investors also liked Stride's guidance for fiscal 2024 on the whole. The company expects sales to be within a range of $1.96 billion to $2.03 billion. That should produce adjusted operating income of between $250 million and $275 million.

There has been a general trend in education to emphasize career planning to a greater extent than in the past. That trend showed up quite clearly in Stride's numbers for the quarter, and shareholders seem to be optimistic that the educational software company can continue to ride the wave of interest to produce more growth throughout fiscal 2024 and potentially beyond.

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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Waste Management. The Motley Fool has a disclosure policy.

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