Waste management services provider Waste Management (NYSE: WM) missed Wall Street’s revenue expectations in Q3 CY2025, but sales rose 14.9% year on year to $6.44 billion. Its non-GAAP profit of $1.98 per share was 1.6% below analysts’ consensus estimates.

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

StockStory’s Take

Waste Management’s third quarter results were met with a negative market reaction, as both revenue and non-GAAP earnings per share fell slightly short of Wall Street expectations. Management attributed the shortfall to lower-than-expected recycled commodity prices and a more measured pace of growth in the Healthcare Solutions segment, resulting from deferred price increases and customer credits. CEO James Fish emphasized that the core collection and disposal business remained the primary driver of operational EBITDA, highlighting strong disposal volumes and disciplined pricing strategies. Fish noted, “Our collection and disposal business continues to be the engine behind our growth, contributing more than half of the year-over-year increase in operating EBITDA.”

Looking forward, management’s guidance for the remainder of the year and into 2026 is shaped by anticipated benefits from recent investments in technology, fleet upgrades, and sustainability initiatives. The company expects the integration of Healthcare Solutions to deliver further synergies and free cash flow improvements as operational efficiencies and cross-selling opportunities are realized. CFO Devina Rankin, in her final call before retirement, stated, "We are well positioned to achieve another year of strong earnings, margin and cash flow growth in 2025 and to build on our success as we go into 2026." Management also highlighted that investments in automation and renewable natural gas facilities are expected to transition from peak spending to delivering tangible returns in the coming year.

Key Insights from Management’s Remarks

Management attributed third quarter performance to disciplined pricing, operational efficiencies, and continued progress in integrating the Healthcare Solutions business, even as market headwinds weighed on recycling and medical waste revenues.

• Healthcare Solutions Integration: The acquisition of the medical waste business has been fully integrated into Waste Management’s operational structure, resulting in improved margins for the segment as cost synergies and cross-selling opportunities with hospital networks materialize.
• Recycling Margin Resilience: Despite a nearly 35% year-over-year decline in recycled commodity prices, the recycling business grew operating EBITDA by 18%, reflecting the impact of automation investments and process improvements that lowered labor and operating costs.
• Solid Waste Volume Gains: Municipal solid waste (MSW) and special waste volumes each increased around 5%, driven by new event-based work and network strength, with management stressing that these gains were not tied to wildfire cleanup, which had previously provided a temporary boost.
• Operational Efficiencies: Investments in fleet technology and employee retention led to reduced maintenance and risk management costs, with operating expenses below 60% of revenue for a second consecutive quarter and driver turnover at a record low.
• Strategic Investment Payoff: Management underscored that recent years’ investments in technology, automation, and sustainability are now beginning to lower costs and are expected to contribute more strongly to free cash flow and margin expansion in 2026.

Drivers of Future Performance

Management expects future performance to be driven by the realization of cost efficiencies, further progress on integrating Healthcare Solutions, and the scaling of sustainability-related businesses.

• Healthcare Solutions Synergies: The company expects continued synergy capture from the Healthcare Solutions acquisition, including reduced integration costs, expanded cross-selling, and further internalization of medical waste volumes into Waste Management’s existing landfill network. Management believes these factors will support free cash flow growth.
• Sustainability and Automation Returns: As spending on new recycling and renewable natural gas facilities winds down, management anticipates significant growth in related EBITDA. The company projects that these investments will yield improved operating margins and higher cash conversion rates as automation reduces labor costs and increases throughput.
• Market Risks and Headwinds: Management acknowledged ongoing challenges, including volatility in recycled commodity prices and delays in minimum content legislation, which could affect recycling profitability. There is also some customer churn in healthcare services, partially due to lingering system implementation issues, but management expects stabilization by mid-2026.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be watching (1) the pace of synergy realization and revenue stabilization in the Healthcare Solutions segment, (2) sustained improvement in recycling margin performance despite commodity price volatility, and (3) execution on technology and automation investments to further reduce operational costs. Progress on regulatory developments affecting recycling and renewable energy markets will also be important indicators for future growth.

Waste Management currently trades at $204.20, down from $213.67 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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