Melius Research's analyst has started coverage of Waste Management, Inc. (WM, Financial) with a Buy recommendation, setting a price target of $263. The analyst anticipates further strong performance in both the short and long term, citing reduced risk, limited earnings downside, and enhanced growth potential. Despite the market's acknowledgment of the waste industry's quality, the analyst sees room for continued outperformance.
Melius emphasizes that while WM's valuation multiples align closely with historical averages, the current premium is justified and potentially greater than in the past. The competition in waste management is robust, particularly in an inflationary environment where companies like WM can leverage strong pricing power, often tied to inflation through contractual agreements.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 19 analysts, the average target price for Waste Management Inc (WM, Financial) is $248.90 with a high estimate of $271.00 and a low estimate of $196.11. The average target implies an upside of 5.32% from the current price of $236.33. More detailed estimate data can be found on the Waste Management Inc (WM) Forecast page.
Based on the consensus recommendation from 25 brokerage firms, Waste Management Inc's (WM, Financial) average brokerage recommendation is currently 2.2, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Waste Management Inc (WM, Financial) in one year is $238.70, suggesting a upside of 1% from the current price of $236.33. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Waste Management Inc (WM) Summary page.
WM Key Business Developments
Release Date: April 29, 2025
- Total Company Operating EBITDA Growth: Increased by more than 12% in Q1 compared to Q1 2024.
- Sustainability Businesses Operating EBITDA Growth: Grew by over 20% year-over-year.
- Collection and Disposal Operating EBITDA Growth: Up almost 5% with a margin expansion of 10 basis points.
- Revenue Growth: Driven by collection and disposal yield of 4% and core price of 6.5%.
- Operating Expenses as a Percentage of Revenue: 60.5%, a 40-basis-point improvement from Q1 2024.
- Legacy Business Margin: Achieved 30% margin for the fourth consecutive quarter, a 40-basis-point increase from Q1 2024.
- Total Company Margin: 28.5% in the quarter.
- Operating Cash Flow: $1.21 billion in Q1.
- Capital Expenditures: $831 million in Q1.
- Free Cash Flow: $475 million in Q1.
- Dividends Returned to Shareholders: $336 million in Q1.
- Leverage Ratio: 3.58 times at the end of the quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Waste Management Inc (WM, Financial) reported a strong start to 2025 with first-quarter results exceeding expectations, driven by a 12% growth in operating EBITDA.
- The company's sustainability businesses, including recycling and renewable energy, saw a combined operating EBITDA growth of over 20% year-over-year.
- WM's focus on technology and automation has led to significant improvements in operational efficiency, contributing to margin expansion.
- The integration of WM Healthcare Solutions is progressing well, with a clear path to achieving $250 million in annual run rate synergies by 2027.
- WM has a robust pipeline of tuck-in acquisition opportunities, expecting to close more than $500 million in solid waste acquisitions in 2025, indicating strong growth potential.
Negative Points
- The expiration of alternative fuel tax credits posed a 30-basis-point headwind to the company's margins.
- Winter weather in the Southeast and Gulf Coast regions negatively impacted volumes and posed challenges in the first quarter.
- The strategic exit from low-margin residential business and economic pressures on the industrial segment led to flat volumes in the collection and disposal business.
- The integration of Stericycle's ERP system has presented challenges, impacting the efficiency of the WM Healthcare Solutions business.
- The recycling brokerage revenue is down relative to expectations, although it has low margin impact.
