Waste Management $WM (-0.39%) announced its Q4 results and financial figures in the early hours of this morning "Fourth Quarter and Full-Year 2024 Earnings" [1] were published.
I would like to go into this in more detail in this article.
The earnings call is also still ongoing, which started at around 4 p.m., but has not yet revealed any new information, which is why I am posting now.
According to Deepdive, WM accounts for around 3% of the total portfolio in my portfolio through direct and indirect investments.
Before I go into the figures, I would like to briefly differentiate the difference between the published figures and the adjusted figures in the case of WM:
"Reported" & "Adjusted"
- Reportedincludes one-off costs (e.g. acquisition costs of Stericycle, restructuring).
- Adjusted: shows the core business without special effects - for better comparability.
📊 Financial year figures at a glance
- Sales: $22.06 billion (Reported & Adjusted) (+8%)
- Operating result: Reported: $4.06 billion (+13.6%), Adjusted: 4.30 bn $ (+12.2%)
- EBITDA: Reported: $6.33 bn (+12%), Adjusted: $6.56 bn (+11%)
- Net income:Reported: $2.75 bn (+19%), Adjusted: 2.92 bn $ (+16%)
- Dividend 2025: Planned $3.30 per share (+10%)
🏭 Business divisions & their development
WM is the market leader in waste management and is primarily active in Canada and the USA as its main markets, with strong growth in the USA.
Collection & Disposal
- 19.72 billion $ turnover (+5%)
- Strongest growth due to price increases (+6.7%) & optimization of operating structure.
Recycling Processing & Sales
- 1.60 bn $ turnover (+27%)
- Strong recovery due to higher raw material prices for recycled material.
WM Renewable Energy (Renewable Energies)
- 318 million $ turnover (+16.5%)
- Expansion of biogas projects; 50% of production for 2025 already sold.
WM Healthcare Solutions (medical waste)
- 403 million $ turnover (new!)
- New due to the acquisition of Stericycle; high margins expected.
💰 Financial strength & debt structure
- Cash flow from operating activities: USD 5.39 billion (+14.2%)
- Free cash flow (after investments): USD 2.32 billion (+21.8%)
- Cash position: 487 million $
- Total debt at the end of 2024: USD 24.58 billion
- Debt repayments: USD 17.87 billion in 2024
- Debt ratio target: 3.1x EBITDA by the end of 2025
- Temporary pause of share buybacks to prioritize debt reduction.
💡 Conclusion so far
- Growth drivers remain pricing, sustainable investments & Stericycle integration.
- Recycling & renewable energies will become more profitable in the medium term
- High debt due to Stericycle acquisition, but strong cash flow growth.
💼 Stericycle acquisition: expansion into the healthcare sector
On November 4, 2024, WM acquired Stericycle for $7.2 billion
Financial impact:
- 2024: $403 million in additional revenue
- 2025: Expected synergies of $100 million, $250 million by 2027
- EBITDA margin: only 1% in 2024, expected to reach 15.1% in 2025
Why Stericycle?
- Stericycle is the largest provider of medical waste disposal in North America. With this acquisition, WM is entering the healthcare sector. A growth segment with stable earnings and margins.
🌱 Sustainability projects with fast payback
WM invests heavily in renewable energy and recycling automation.
- 7 out of 20 planned biogas plants are already in operation (biogas projects have a payback period of just 3 years)
- 25 out of 39 recycling automation projects have already been completed (recycling plants pay for themselves in 6 years)
⚡️Marktposition & competitive advantages
WM is the largest waste management company in North America with:
- 12,000 natural gas trucks - largest fleet in the industry
- Largest recycling network in North America
- Market leader in landfill gas-to-energy
Why is this important?
- Leading infrastructure means economies of scale & cost leadership
- Competition can hardly keep up, which ensures stable margins
WM thus remains the top dog in the waste sector and consistently exploits its economies of scale.
💰Cost optimization and increased efficiency
In 2024, WM implemented several measures to reduce costs and increase efficiency:
- 60.7% of revenue went towards operating costs - a decrease from 61.7% in 2023
- Digital automation in recycling centers reduces labor costs in the long term
- Frontline retention programs improve employee loyalty
WM has not only grown through acquisitions, but is also optimizing existing processes.
...I have heard renewable energy and sustainability projects?...
🚨 Trump 2.0: risk for renewable projects?
Classification independent of the annual report
WM has made significant investments in renewable energy in recent years, including the development of plants to convert landfill gas into renewable natural gas (RNG). The company plans to invest over USD 1.4 billion between 2022 and 2026 in the construction of new facilities to convert landfill gas into pipeline-quality RNG. [2]
These projects are not only environmentally friendly, but also economically attractive as they will help power WM's own natural gas fleet and feed surplus energy into the grid.
Potential challenges and opportunities
Although the current government is less supportive of renewable energy projects, WM's investments in RNG may be less affected as they reduce methane emissions and thus offer environmental benefits that could be recognized even under a fossil-friendly policy.
Nevertheless, changes in the regulation and financing of renewable energy could affect the viability and expansion of such projects. WM must therefore closely monitor policy developments and adapt its strategies where necessary to achieve both environmental and economic goals.
The Trump administration favors fossil fuels and is limiting support for renewable energy. For WM, this means potential challenges, but also the opportunity to continue to operate successfully in the renewable energy sector through innovative approaches and adaptability.
🔮 Outlook 2025
Expectations for 2025: Ambitious growth targets
- WM is planning strong growth for 2025 with an increase in sales of 16.4% to up to USD 25.80 billion (driven by 5.7% organic growth and 10.7% through acquisitions)
- Adjusted EBITDA is expected to increase by 15% to up to $7.65 billion
- WM Healthcare Solutions to grow by 9%, supported by operational optimizations
🌟 The strengths:
- Defensive business model - waste disposal will always be necessary.
- Pricing power - Higher prices drive growth.
- Sustainability projects are highly profitable.
- Stericycle takeover opens up new growth areas.
⚠️ Challenges:
- High debt - pause share buybacks, focus on debt reduction.
- Trump & renewable energies - Political uncertainties, but biogas remains profitable.
- Commodity price fluctuations - recycling depends on market prices.
Personal assessment
WM remains a defensive long-term investment, but not cheaply valued. The integration of Stericycle, the sustainability strategy and the high cash flow make the company attractive. In the long term, however, I believe WM will be more affected by political influences than before. I am currently still running a savings plan, so the total share in the portfolio will rise to around 4% over the next few months.
Thanks for reading this far. Furthermore, it is understood that my personal opinion does not constitute investment advice or a recommendation to buy or sell.
_________
Sources:
[1] https://investors.wm.com/static-files/8b64fa87-7d93-423c-9647-defc1fe353e4
