Waste Management $WM (-0,1 %) 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

📊 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 (-0,1 %)
$RSG (-0,48 %)
$WCN (-0,64 %)
$CLH (+0,82 %)
$CWST (-1,91 %)

Waste Management $WM (-0,1 %) 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

[2] https://www.waste360.com/fleet-technology/wm-s-malik-on-the-company-s-rng-investment-strategies-and-near-future-plans?utm_source=chatgpt.com

$WM (-0,1 %)
$RSG (-0,48 %)
$CLH (+0,82 %)
$CWST (-1,91 %)