Waste Management, Inc.
Analysis
After years of building trucks, recycling plants, gas-from-landfill plants and a medical-waste business, WM is now collecting: margins are at records and cash is arriving fast. The missing piece is volume, and the 2026 revenue outlook was cut because of it. How much of this year's cash growth comes from slower spending?
- WM has flipped from building to collecting.
Free cash flow in the first half grew more than 50% as spending fell with the plant builds finished, and the year should land near $3.8 billion. So WM now hands most of what it earns back to shareholders instead of reinvesting it.
- Profit now comes from price and cost, not more waste.
Core price is still rising above 5.5% while the collection business held its cost growth under 2%. That is why WM raised its margin outlook in the quarter it cut revenue: profit no longer needs the economy to grow. How does this price-to-cost spread compare with the past five years?
- Volumes stalled, so the revenue outlook came down.
The winter shortfall never came back in spring, so full-year volumes are now guided down nearly 1% and revenue guidance was cut by half a point. Earnings and cash targets were kept anyway, leaving price to cover a smaller tonnage base. How much of the volume shortfall came from lost national-account contracts?
- Price-cost spread disciplineThe bull case rests on pricing that keeps running ahead of cost inflation, letting WM expand margins even when the waste it collects barely grows.
- Recycling and renewable gas returnsYears of spending on recycling automation and renewable natural gas plants are now producing earnings and cash flow rather than consuming capital.
- Healthcare synergy captureBulls argue the medical waste business is finally integrated, so cost savings and cross-selling can show up in profit instead of being hidden by billing problems.
- Volume shortfallThe bear case is that collection volumes keep missing plan as commercial accounts are lost and residential customers leave, so revenue growth depends on price alone.
- Commodity and RIN exposureRecycling and renewable gas earnings move with scrap and credit prices the company cannot control, so forecast returns on those plants have already been trimmed once.
- Medical waste customer churnSkeptics say hospital customers lost during the billing system troubles still weigh on the medical waste segment, leaving its revenue shrinking while costs are cut.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Purchase | ≥$15K | Jul 8 | Sep 22 |
Donald Trump Republican · Executive | Purchase | ≥$50K | Jun 12 | Aug 22 |
Donald Trump Republican · Executive | Purchase | ≥$100K | May 18 | Jul 1 |
Donald Trump Republican · Executive | Sale | ≥$1K | May 18 | Jul 1 |
Donald Trump Republican · Executive | Sale | ≥$100K | May 11 | Jul 1 |
Congressional trading data provided by QuiverQuant
How Waste Management turned $25.2B of revenue into $4.3B of operating income.
| Revenue | ||
|---|---|---|
| Commercial | $5.6B | ▲ 4.82% YoY |
| Landfill | $3.8B | ▲ 9.75% YoY |
| Residential | $3.5B | ▲ 1.27% YoY |
| Other Collection | $3.2B | ▲ 7.12% YoY |
| Industrial | $3.1B | ▲ 0.55% YoY |
| Healthcare Solutions | $2.5B | ▲ 522.33% YoY |
| Transfer | $1.5B | ▲ 8.76% YoY |
| Recycling Processing and Sales | $1.5B | ▼ 6.92% YoY |
| Renewable Energy | $478.0M | |
| Corporate and Other | $22.0M | |
| Total revenue | $25.2B | |
| Gross profit | $10.2B | 40.4% |
| Operating income | $4.3B | 17.1% |