WM Q1 Earnings Call: Margin Pressure Despite Revenue Growth and Sustainability Investments

May 12, 2025 at 14:23 PM EDT

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Waste management services provider Waste Management (NYSE: WM) missed Wall Street’s revenue expectations in Q1 CY2025, but sales rose 16.7% year on year to $6.02 billion. Its non-GAAP profit of $1.67 per share was 5% above analysts’ consensus estimates.

Is now the time to buy WM? Find out in our full research report (it’s free).

Waste Management (WM) Q1 CY2025 Highlights:

Revenue: $6.02 billion vs analyst estimates of $6.11 billion (16.7% year-on-year growth, 1.4% miss)
Adjusted EPS: $1.67 vs analyst estimates of $1.59 (5% beat)
Adjusted EBITDA: $1.72 billion vs analyst estimates of $1.71 billion (28.5% margin, in line)
Operating Margin: 16.8%, down from 19.7% in the same quarter last year
Free Cash Flow Margin: 7.9%, down from 13.8% in the same quarter last year
Market Capitalization: $93.66 billion

StockStory’s Take

Waste Management’s first quarter results reflected robust year-on-year revenue growth, but management acknowledged margin pressures, particularly in operating and free cash flow margins. CEO Jim Fish attributed the quarter’s performance to strong execution in the core collection and disposal business, contributions from sustainability investments, and early progress integrating the newly acquired WM Healthcare Solutions segment. Fish emphasized, “We had a strong start to the year with first quarter results exceeding our expectations on several fronts.”

Looking forward, management discussed ongoing efforts to improve cost efficiency and capture synergies from the Stericycle acquisition, now operating as WM Healthcare Solutions. CFO Devina Rankin highlighted the company’s focus on technology-enabled cost optimization and anticipated further benefits from automation, synergy realization, and sustainability projects. Management signaled confidence in achieving full-year financial targets, noting that, “We remain confident in our ability to execute our plans and achieve our full year targets.”

Key Insights from Management’s Remarks

Waste Management’s leadership highlighted several operational and strategic initiatives that influenced first quarter results and set the stage for the rest of the year.

Sustainability Investments Drive Growth: The company’s recycling and renewable energy businesses delivered over 20% operating EBITDA growth year-on-year, supported by the addition of new automated recycling facilities and renewable natural gas (RNG) plants.
Healthcare Integration Progress: Early integration of WM Healthcare Solutions (acquired from Stericycle) is underway, with management reporting customer enthusiasm for enhanced environmental expertise and technology offerings. Approximately $16 million in synergy value was captured in the quarter, with more expected as system integrations progress.
Cost Optimization Initiatives: Ongoing automation and technology deployment in routing, resource planning, and facility operations have yielded improved driver retention and reduced operating expenses. Management expects further headcount reductions through attrition as automation expands.
Residential Business Restructuring: The company continues to exit low-margin residential contracts, leading to flat overall volumes but improved residential margins, which surpassed 20% for the first time in six years.
Resilience Amid External Pressures: Severe winter weather in key regions and the expiration of alternative fuel tax credits affected volume and margin, but these headwinds were partially offset by operational improvements and pricing discipline, especially in commercial and landfill segments.

Drivers of Future Performance

Management’s outlook for the remainder of the year centers on capturing additional synergies from recent acquisitions, expanding sustainability operations, and optimizing the cost base through technology and automation.

Synergy Realization in Healthcare: The company anticipates accelerating synergy capture in WM Healthcare Solutions, particularly through back-office streamlining and internalizing fleet and disposal functions in the second half of the year.
Sustainability Expansion: Further growth is expected from newly commissioned RNG and recycling facilities, with management confident that sustainability-related EBITDA will continue to increase as more projects come online.
Pricing and Cost Management: Discipline in core price execution and ongoing automation are expected to help offset inflationary pressures and potential volatility in commodity pricing, supporting margin stability even if volume growth remains modest.

Catalysts in Upcoming Quarters

In the upcoming quarters, our analysts will be closely monitoring (1) the pace and magnitude of synergy realization from the WM Healthcare Solutions integration, (2) progress in bringing new recycling and RNG facilities online and their contribution to profitability, and (3) ongoing cost reductions and efficiency gains from automation. Additionally, the ability to sustain pricing discipline and effectively manage commodity risks will be key factors influencing results.

Waste Management currently trades at a forward P/E ratio of 30.1×. At this valuation, is it a buy or sell post earnings? Find out in our free research report.

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