Waste Management $WM (-1,03 %) 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.
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Thank you for reading 🤝
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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
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