By Chelsea Emery

NEW YORK (Reuters) - Waste Management Inc (WMI.N: Quote, Profile, Research), the largest U.S. trash hauler, posted a 1.3 percent rise in quarterly profit on Tuesday as price increases helped offset sharply rising diesel fuel costs.

First-quarter profit rose to $241 million, or 48 cents per share, from $238 million, or 45 cents per share, a year earlier.

Excluding special items, including restructuring charges and a benefit from tax audit settlements, earnings were 47 cents per share. On that basis, analysts, on average, looked for 46 cents, according to a survey by Reuters Estimates.

"We overcame several challenges during the first quarter, including the impact of sharply rising diesel fuel prices, a slow economy and harsh winter weather in the Midwest," Chief Executive David Steiner said in a statement. It reviewed low-margin accounts and increased prices or culled those businesses, he added.

Revenue rose 2.4 percent to $3.27 billion on higher selling prices for the commodities the company recycles. Analysts expected sales of $3.20 billion.

It was a "solid operating performance, despite fuel and weather headwinds," JP Morgan analyst Scott Levine wrote in a note to clients.

ACQUISITION OUTLOOK

The company said it sees promising acquisition candidates. "When we look at the deal pipeline, we see some good deals out there that are not only good, solid tuck-in acquisitions for us, but actually some that will help us provide some services to our customers that we currently don't provide," a company representative said on a conference call with analysts and investors.