Waste Management Reports Strong Q3 2024 Performance

In a recent earnings call, Waste Management (NYSE: WM) reported a strong performance in the third quarter of 2024, with an 11% increase in operating EBITDA and a record margin of 30.5%. CEO Jim Fish announced that the company is on track to achieve its full-year guidance, with projected operating EBITDA of approximately $6.5 billion. The call also highlighted the nearly $800 million in solid waste acquisitions and the progress of the Stericycle (NASDAQ: SRCL) acquisition, expected to drive further growth.

Key Takeaways

• Waste Management's operating EBITDA increased by 11% in Q3 2024, with a record margin of 30.5%.
• Progress on the Stericycle acquisition, with shareholder approval and regulatory clearances pending only for Canada.
• Achieved operational efficiencies through technology and automation, leading to a 4% increase in residential efficiency and 5.7% growth in MSW volume.
• Free cash flow grew by 20% year-to-date, with projected total capital expenditures between $3.15 billion and $3.25 billion, focusing on sustainability investments.
• Potential additional EBITDA of $150 million to $200 million from landfill gas facilities anticipated from 2025 onward.

Company Outlook

• Waste Management projects a strong year in 2025, with significant sustainability investments.
• Anticipates a 10% growth rate in operating EBITDA for 2024, targeting $800 million EBITDA from sustainability-related investments by 2027.
• Optimistic about operational efficiency and growth prospects through 2027 despite potential economic uncertainties.

Bearish Highlights

• Operating EBITDA margin was slightly below the projected range of 30.5% to 31% due to higher recycling commodity prices.
• Industrial volume growth remains uncertain, with reported decline of 4.1% in the roll-off business for the quarter.
• Expiration of the alternative fuel tax credit in 2025 may present a 30 basis point headwind.

Bullish Highlights

• Acquisition of Stericycle is expected to enhance strategic growth, with anticipated synergies exceeding initial estimates.
• A five-year investment in technology is focusing on addressing anticipated labor shortages, boosting efficiency.
• Revenue generation from sustainability initiatives, such as landfill gas facilities, is projected to increase EBITDA significantly from 2025 onward.

Misses

• There was 20 basis points margin pressure from higher recycling commodity prices.
• Revenue generation from completed sustainability projects may face delays due to regulatory processes with the EPA.

Q&A Highlights

• Management expects a clearer evaluation of Stericycle's performance by February 2025.
• Approximately 1,100 routes are eligible for automation, which may take two to three years to fully implement.

Waste Management (WM) has demonstrated robust financial health in Q3 2024, with an 11% increase in operating EBITDA and a record margin, indicating that the company's strategic initiatives and investments are yielding positive results. The firm’s focus on technology and automation to improve efficiency and manage costs has significantly contributed to its strong performance. Despite some margin pressures and uncertainties in volume growth, WM's long-term outlook remains optimistic, with substantial investments in sustainability poised for future EBITDA and free cash flow growth. The upcoming integration of Stericycle into WM's operations is particularly noteworthy, as it is expected to unlock additional operational efficiencies and revenue growth opportunities, solidifying WM's position in the solid waste management industry.

InvestingPro Insights

Waste Management's robust financial performance in Q3 2024 aligns with data from InvestingPro, showing a market capitalization of $86.54 billion. The revenue growth of 6.17% over the last twelve months underscores the positive trajectory mentioned in the earnings call, supported by an EBITDA growth of 12.12%. WM has raised its dividend for 20 consecutive years, with a current dividend yield of 1.37%, reflecting financial stability and commitment to shareholder returns.

Full Transcript – Waste Management (WM) Q3 2024

Operator

Good day, and thank you for standing by. Welcome to WM Third Quarter 2024 Earnings Conference Call…
1. Ed Egl: Thank you, Olivia. Good morning, everyone and thank you for joining us for our third quarter 2024 earnings conference call…
2. Jim Fish: Okay. Thanks, Ed, and thank you all for joining us…
3. John Morris: Thanks, Jim, and good morning…
4. Devina Rankin: Thanks, John, and good morning…

Waste Management continues on a trajectory of growth, fueled by strategic acquisitions, operational improvements, and a focus on sustainability. Shareholder value remains a priority as the company navigates the current economic landscape.