Waste Management reported a strong quarter on Wednesday, yet the stock sunk almost 2 percent in response.
Both Jim Cramer and the CEO David Steiner were stunned by the stock's drop, as they couldn't find a single piece of hair on the quarter.
"We don't manage this business for one-day stock moves; we manage it for the long term. So, if we keep producing quarters like we produced today the stock will definitely take care of itself," Steiner said.
Waste Management is the No. 1 garbage disposal company in North America that serves over 21 million customers in the U.S. and Canada. It has 249 landfills and more than 100 materials recovery facilities. Cramer likes to keep this company on his radar to provide clarity on the state of the economy.
The company reported what seemed to be a strong quarter, with a 3-cent earnings beat, higher than expected revenues up 3.3 percent year-over-year and positive volume growth. Commercial garbage volumes turned positive for the first time in over a decade. Management also raised its full-year earnings and cash flow guidance.
"I'm stunned. I thought this was by far the best quarter in a decade," the "Mad Money" host said.
Cramer attributed the pullback of the stock to the simple fact that Waste Management had run up going into the quarter. Prior to reporting earnings, the stock was up 26 percent for the year.
Waste Management did lose recycling contracts during the quarter, but the CEO clarified that those were simply negative margin contracts.
The company recently made a move to de-risk its recycling business by changing the business model. In the past, it sold commodities and then split the proceeds with customers. That meant that if the price of the commodity went down, the split left Waste Management with not being able to cover its processing costs.
Thus, it changed the model so that recycling now covers the processing cost and allows Waste Management to take a profit, and then it splits with the customer. This transformed recycling from a tailwind into a headwind for the company
"We really looked at this quarter and there is not a single hole in this quarter. We just intend to keep doing the same thing, quarter in and quarter out," Steiner said.