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Waste Management Q1 2025: Waste professionals with a doctorate?

Waste Management $WM (+0.97%) is the third largest position in my portfolio with approx. 4.5%... and I feel quite comfortable with that.


The Q1 figures came out on 29.04. I have categorized the figures for myself.

With this post and my general classifications, I am also trying to provide a good, comprehensible overview to give all "shareholders" or future shareholders an adequate insight and ensure an understanding of the company.


SourcesQ1 Report [1] and Earnings Call [2]


WM presents a strong Q1, with double-digit sales growth and a solid operating performance. However, earnings per share are lower despite record sales. Find out why this is not necessarily a bad sign here. Have fun!


📊 ESTIMATES VS. REPORTED

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📊 Q1 figures at a glance


  • Turnover6.02 billion $ (+16.7 %)
  • Adjusted EBITDA1.72 billion $ (+12.2 %)
  • Adjusted EPS1.67 $ (previous year: 1.75 $)


Why is sales growing strongly but EPS falling?


In the first quarter of 2025, WM reported adjusted EPS of $1.67, compared to $1.75 in the previous year, despite a +16.7% jump in sales, does that sound alarming at first? But it's not...


1 . The Stericycle takeover has a double effect: (more context later)


Sales increase because Stericycle is now fully included in the balance sheet ($619m sales in Q1).


At the same time, however, costs are also rising:


  • Interest payments on new debt that was used for financing
  • Amortization of the purchase price
  • One-off integration costs (e.g. system conversions, personnel)


All of this has a negative impact on earnings per share, even though the new division is already profitable.


2 . Special tax effects & discontinuation of subsidies


  • In the previous year, WM benefited from tax credits for alternative fuels, which expired in 2025.
  • This explains part of the decline compared to the strong Q1 2024.


3 . Higher capital costs put pressure on free cash flow


  • Even though operating cash flow remained solid ($1.21 billion), free cash flow was only $475 million, leaving less room for buybacks or earnings growth.


Conclusion so far: The falling EPS is not a warning signal, but a consequence of...


  • strategic growth (acquisition),
  • temporary integration costs,
  • expiring tax benefits and
  • increased interest rate environment.


In the long term, EPS should improve again significantly as soon as synergies from the Stericycle integration and new RNG/recycling plants take effect.


🚛 What is the traditional core business doing?


The so-called legacy business includes:


  • Collecting, transporting and disposing of waste
  • Customers: Cities, households, companies
  • Service: Planning, logistics, landfills, disposal & recycling


Q1 2025:


  • Turnover5.40 billion $
  • Adjusted EBITDA1.62 billion $
  • EBITDA margin: 30 % (Q1 2024: 29,6 %)
  • EBITDA growth: +5 % YoY


Growth driver:


  • Core pricing +6.5 %
  • Cost optimization:...


COO John Morris:


"We reduced operating costs for the sixth consecutive quarter, now at 60.5% of sales."


The reason for this:


  • Focus on employee retention & process automation
  • Route planning & resource deployment improved through digital tools
  • Residential margin at 20% for the first time in 6 years due to targeted withdrawal from low-margin customers
  • Withdrawal from residential (private households):


  • A lot of effort, low margin
  • Focus now on commercial & industrial = better cost/income ratio


Comment (COO John Morris):


"This was the fourth quarter in a row with a 30% margin and that despite a difficult basis for comparison and winter influences."


WM is concentrating on quality rather than volume, more income through targeted pricing and a focus on high-margin customers.


💊 WM Healthcare Solutions Stericycle takeover: between waste and medicine, WM reorganizes itself


WM acquired Stericycle, the leading provider of medical waste disposal, for $7.2 billion in 2024.


The business is less cyclical, fast-growing and in a regulated market.


Q1 2025:


  • Turnover619 million $
  • EBITDA95 million $
  • EBITDA margin: 15,3 %


  • Margin improvement compared to Q4 2024: +20 basis points
  • Target synergies: $80-100 million in additional EBITDA by the end of 2025
  • Target synergies: USD 250 million annually by 2027 (ongoing savings + efficiency gains)


-> e.g. through joint administration, logistics, location optimization


Comment (CEO):


"Our customers value our digital environmental platform and nationwide network - a clear competitive advantage."


♻️ Recycling & Renewable Energy


  • Recycling: WM sorts & sells raw materials such as paper, plastic and metal
  • Renewable Energy: Recovery of biogas (RNG) from landfills


Q1 2025:


  • Combined EBITDA contribution18 million $
  • Ø price for recycled raw materials88 $/ton (previous year: 84 $)
  • Positive increase, but still below previous highs (e.g. 2022: approx. 120 $)


An EBITDA contribution of $18 million compared to total EBITDA of $1.72 billion?


That sounds vanishingly small? I asked myself the same question...


Why the amount seems low, but still fits


1 . Recycling & Renewable Energy are capital-intensive, long-term oriented


  • These areas require high investments in advance (e.g. plants, automation, RNG projects).
  • The returns come over years, not in the first or second quarter.


2 . Growth still in the start-up phase


  • Many plants (especially RNG) are still under construction or have recently come online.
  • CEO Jim Fish said: "8 new RNG plants are currently under construction, all of which are scheduled for completion in 2025."
  • The full EBITDA impact will therefore only unfold later.


3 . Recycling margins are heavily dependent on raw material prices


  • Prices for recycled raw materials were $88/tonne in Q1, which is well below previous highs (e.g. 2022: $120).
  • Ergo: fluctuating contribution to EBITDA, but not a structural problem.


4 . Benchmark: 20% growth YoY


  • EBITDA from Recycling & Renewable Energy increased by >20% compared to Q1 2024 .
  • The trend is therefore positive, even if the absolute figure appears small.


➡️ It is a growing business area with long-term potential. EBITDA contributions will increase in the next quarters & years as soon as new plants are up and running.


💰 Further financial figures


  • Adjusted EBITDA margin (total): 28.5% (previous year: 29.6%)
  • Free cash flow: $475 million (previous year: $714 million)
  • Investments in sustainability128 million $
  • Cash position216 million (end of 2024: $414 million)


Further voices from the earnings call:


CFO Devina Rankin on financial strategy & risks


  • Free cash flow in Q1 as planned: $475 million
  • CapEx at $831 million, focus on sustainability & fleet ramp-ups
  • Customs risks lowas WM pre-produced equipment at an early stage
  • Share buybacks further paused, focus on deleveraging
  • Leverage ratio: 3.58x, target by the end of 2025: ~3.15x


"Despite interest burden and investments, we are fully on track - operational strength and synergy potential remain intact."


CEO Jim Fish emphasized:


"I'm proud of the fact that we've become a predictably strong performer, quarter after quarter, over the past few years."


He sees WM in a strong strategic position, particularly thanks to three drivers:


  • Growth in the core business (Collection & Disposal)
  • strong contribution from Stericycle
  • Sustainable investments in recycling & biogas (RNG)


Particularly exciting:


  • The automated recycling centers achieved EBITDA margins twice as high as non-automated plants.
  • 2 new plants went online in Q1, with 7 more to follow by the end of 2025.
  • 8 new RNG plants are under construction, all with high yields and progressing according to plan.


"Our sustainability strategy is working, these projects are delivering strong, growth-oriented EBITDA."


The call once again showed how operational fine-tuning, automation and acquisitions go hand in hand and underlined the following points:


  • Technology and pricing secure margins
  • Sustainability is more than a buzzword, it delivers profit
  • Stericycle brings new potential that is structurally anchored


P/E ratio & current valuation (personal assessment, no investment advice)


Current level: ~ 34,49

In recent years: between 25-30


➡️ the current P/E ratio signals that the market believes WM will continue to enjoy stable growth and security.


Are there any special effects in earnings that distort the P/E ratio?


Yes, the ones already mentioned. Nevertheless, explained again:


1 . EPS (earnings per share) is currently falling slightly due to:


  • Interest costs due to Stericycle financing
  • Depreciation & integration costs
  • Elimination of tax credits for alternative fuels


➡️ This means:


  • The "G" in the P/E ratio is currently under pressure, but not structurally weakened
  • The P/E ratio appears artificially higher because earnings are temporarily lower


➡️ The current high P/E ratio is explainable and temporary


  • WM remains a defensive quality stock with strong cash flow
  • Not a bargain, but a solid investment for long-term strategists
  • If you think long-term (3+ years, you will find a company with a clear strategy & growth path here

🔮 Conclusion & outlook


WM remains a fundamental long-term runner with vision.

Although the Stericycle financing is putting pressure on EPS and cash flow in the short term, the focus on high-margin areas, sustainability and healthcare opens up long-term potential.


  • Positive: Strong legacy business, successful entry into healthcare disposal


  • NeutralEPS slightly down, cash flow temporarily under pressure


  • RisksInterest costs, margin pressure in recycling, political uncertainty regarding sustainability


My conclusion: WM delivers structurally, those who think long-term will find stability and perspective here.


I remain invested, position will not be increased for the time being.

________________


Thank you for reading 🤝


________________


Sources:


[1] https://investors.wm.com/static-files/00de6f79-f0b6-4b6a-af79-9e5f892c73f5

[2] https://investors.wm.com/static-files/9db3d0d5-0c4d-47fa-aab1-f0bf71a86859


_______________

$WM (+0.97%)
$RSG (+0.79%)
$WCN (+0.97%)
$CLH (-0.6%)
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Thank you 😊👍
Savings plan running, no individual purchases planned for now
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