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WM

WASTE MANAGEMENT INC (WM)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered mixed headline results: EPS beat, while revenue and EBITDA were modestly below consensus; underlying legacy margins remained strong at 30.0% adjusted, for the fourth consecutive quarter, despite winter weather and the expiration of alternative fuel tax credits .
  • Reported revenue was $6.018B (+16.7% YoY), adjusted operating EBITDA $1.715B (+12.2% YoY), and adjusted EPS $1.67; EPS beat consensus by ~$0.08, while revenue and EBITDA modestly missed Street .
  • WM Healthcare Solutions (Stericycle) contributed $619M revenue and $95M adjusted EBITDA, with $16M synergies recognized; management clarified 2025 synergy range at $80–$100M with a $90M midpoint and reaffirmed a $250M run-rate by 2027 .
  • 2025 outlook reaffirmed: adjusted operating EBITDA $7.45–$7.65B, free cash flow $2.675–$2.775B, core price 5.8–6.2%, volumes 0.25–0.75%; tuck-in acquisition revenue outlook raised to $80–$125M (from $35–$80M), and RNG offtakes locked increased to ~75% for 2025 .
  • Stock reaction catalysts: accelerating synergy capture in 2H 2025, stronger RNG volumes/pricing with hedged offtakes, residential margin improvement, and June Investor Day narrative updates .

What Went Well and What Went Wrong

What Went Well

  • Legacy business adjusted EBITDA grew 6% YoY and achieved 30% margin for the fourth straight quarter; margin expansion was driven by price-cost spread and recycling automation (+20 bps), offsetting the 30 bps headwind from alternative fuel tax credit expiration .
  • Sustainability businesses delivered: recycling and renewable energy combined operating EBITDA grew >20% YoY; automated recycling facilities delivered nearly 2x margins vs. non-automated; multiple RNG plants were brought online with strong pricing for natural gas and renewable electricity .
  • Healthcare Solutions integration advancing: $95M adjusted EBITDA in Q1, $16M synergies realized, divestiture of Spain/Portugal completed to refocus portfolio; management reiterated confidence in $80–$100M synergies in 2025 and $250M run-rate by 2027 .
    • Quote: “We’re on track to achieve $250 million of annual run rate synergies in 2027” — Jim Fish .

What Went Wrong

  • EPS strength contrasted with modest revenue and EBITDA shortfalls vs consensus; total company adjusted EBITDA margin fell 110 bps YoY to 28.5%, largely due to WM Healthcare Solutions’ lower margin mix .
  • Weather and mix headwinds: winter weather reduced volume by ~30 bps; industrial temporary roll-off softness and unexpected national account bankruptcies pressured yield conversion despite strong core price .
  • SG&A percentage rose at the total company level on consolidation of Healthcare Solutions, though sequential improvement was achieved; disposal and fleet costs muted Stericycle margin expansion despite 70 bps SG&A improvement QoQ .

Financial Results

Quarterly Performance (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$5.609 $5.893 $6.018
Adjusted Operating EBITDA ($USD Billions)$1.711 $1.706 $1.715
Adjusted Operating EBITDA Margin (%)30.5% 28.9% 28.5%
Diluted EPS (Adjusted) ($)$1.96 $1.70 $1.67
Diluted EPS (Reported) ($)$1.88 $1.48 $1.58

Year-over-Year Comparison (Q1 2024 vs Q1 2025)

MetricQ1 2024Q1 2025
Revenue ($USD Billions)$5.159 $6.018 (+16.7%)
Adjusted Operating EBITDA ($USD Billions)$1.528 $1.715 (+12.2%)
Adjusted Operating EBITDA Margin (%)29.6% 28.5%
Diluted EPS (Adjusted) ($)$1.75 $1.67
Diluted EPS (Reported) ($)$1.75 $1.58

Actual vs. Consensus (Q1 2025)

Values with an asterisk are from S&P Global; Values retrieved from S&P Global.

MetricConsensus*Actual
EPS ($)1.586*1.67
Revenue ($USD Billions)6.105*6.018
EBITDA ($USD Billions)1.708*1.684
  • Result: EPS beat, Revenue miss, EBITDA miss.

Segment Breakdown (Q1 2025)

SegmentNet Operating Revenues ($USD Millions)Adjusted Operating EBITDA ($USD Millions)Adjusted EBITDA Margin (%)
Collection & Disposal (Legacy)4,922 1,807 36.7%
Recycling Processing & Sales384 61 15.9%
WM Renewable Energy91 34 37.4%
Corporate & Other2 (282) N/A
WM Legacy Business Total5,399 1,620 30.0%
WM Healthcare Solutions619 95 15.3%
Total WM6,018 1,715 28.5%

KPIs (Q1 2025)

KPIValue
Core Price6.5%
Collection & Disposal Yield4.0%
Workday-Adjusted VolumesFlat; winter weather impact -30 bps
Internalization of Waste (by disposal costs)70.7%
Free Cash Flow ($USD Millions)$475
FCF before Sustainability Investments ($USD Millions)$603
Sustainability Growth Capex ($USD Millions)$128

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Operating EBITDAFY 2025$7.45–$7.65B $7.45–$7.65B reaffirmed Maintained
Free Cash FlowFY 2025$2.675–$2.775B $2.675–$2.775B reaffirmed Maintained
Core PriceFY 20255.8–6.2% Reiterated 5.8–6.2% Maintained
Volume (Collection & Disposal)FY 20250.25–0.75% Reiterated 0.25–0.75% Maintained
WMHS SynergiesFY 2025Up to $100M $80–$100M; midpoint clarified at $90M Clarified
LeverageYE 2025~3.1x ~3.15x Slightly higher path
Tuck-in Acquisition RevenueFY 2025~$35–$80M (original) ~$80–$125M Raised
RNG Offtake HedgingFY 2025~50% contracted (prior outlook) ~75% contracted; $0.25 RIN sensitivity ≈ $5M Raised/offtake risk reduced
DividendFY 2025Intend to raise to $3.30/share Reiterated intent (Board approval required) Maintained

Earnings Call Themes & Trends

TopicQ3 2024 (Previous Mentions)Q4 2024 (Previous Mentions)Q1 2025 (Current Period)Trend
Technology & AutomationRecord margins on pricing and cost optimization; automation projects ramping 30% legacy margin; automation and recycling/RNG project cadence Continued margin expansion drivers; routing/resource planning; workforce supplementation by tech Improving
RNG & RecyclingCommodity tailwinds; project completions; EBITDA contributions rising 7 RNG projects online; EBITDA contribution outlook updated >20% YoY EBITDA growth; more plants online; pricing strong; 75% RNG offtakes locked Improving/derisked
Macro/WeatherLandfill volumes strong Notable YoY improvements; project momentum Severe winter weather depressed Q1 volumes; volumes rebounded in March/April Transitory headwind
Tariffs/Supply ChainLimited commentary Prepared capex plans; strong deliveries Minimal 2025 cost impact; equipment pre-ordered; no delays expected Managed risk
Healthcare IntegrationPlanning to close Stericycle Acquisition closed; synergy plan to $250M by 2027 $16M synergies in Q1; SG&A improving; ERP optimization; portfolio pruning (Spain/Portugal) Progressing
Regulatory (PFAS)——Passive receiver stance viewed constructively; potential special waste opportunity Opportunity

Management Commentary

  • Strategy and performance: “We had a strong start to the year with first quarter results exceeding our expectations on several fronts… our momentum… gives us confidence in our ability to achieve all of our financial guidance” — Jim Fish .
  • Sustainability investments: “Automated recycling facilities delivered nearly double the operating EBITDA margin compared to our nonautomated facilities… 7 more next‑gen recycling plants scheduled to come in 2025” — Jim Fish .
  • Healthcare synergies: “We’re on track to achieve $250 million of annual run rate synergies in 2027” — Jim Fish .
  • Margin drivers: “Legacy business achieved 30% margin… a 50 bps contribution from favorable price‑to‑cost spread… 20 bps from recycling automation… offset by 30 bps headwind from alternative fuel tax credit” — Devina Rankin .
  • Outlook clarity: “We remain confident… operating EBITDA of between $7.45 billion and $7.65 billion” — John Morris .

Q&A Highlights

  • Seasonality and margin outlook: Management expects normal seasonal margin uptick in Q2, strongest margins in Q3; base business margin expansion of ~100 bps YoY (price‑cost + automation) with Healthcare synergy ramp through 2H .
  • Yield vs core price: Strong core price across lines; yield conversion pressured by mix (industrial temporary softness, wildfire special waste), weather, and bankruptcies in national accounts; sequential improvement expected .
  • Healthcare synergies: ~$16M captured in Q1; 2025 synergy range $80–$100M with $90M midpoint; actions include SG&A rationalization, ERP optimization, fleet/disposal internalization ramping in 2H .
  • RNG/recycling trajectory and tariffs: Tracking plan for ~$190M YoY sustainability growth contributions; no tariff‑related delays or capex increases expected; 75% RNG volumes locked, reducing RIN price sensitivity to ~$5M per $0.25 .
  • M&A pipeline: Solid waste tuck‑ins raised to ~$500M for 2025, with incremental revenue of ~$80–$125M now contemplated vs ~$35–$80M prior .

Estimates Context

  • Q1 2025 EPS beat: $1.67 vs consensus $1.586*; revenue miss: $6.018B vs $6.105B*; EBITDA miss: $1.684B vs $1.708B* .
  • Implications: Legacy margin strength and pricing discipline support EPS beat; weather/mix headwinds and Healthcare margin mix explain modest revenue/EBITDA shortfalls; consensus may edge higher on synergy clarity and hedge‑backed RNG derisking .
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Pricing power and cost discipline continue to expand legacy margins, underpinning EPS resilience even with mix/weather headwinds .
  • EPS beat vs consensus with revenue and EBITDA modest misses; legacy trend remains intact while Healthcare integration dilutes margin but is ramping synergies .
  • Healthcare synergy capture accelerates in 2H (ERP, SG&A, fleet/disposal internalization), a catalyst for margin uplift and multiple support .
  • RNG volumes and pricing are better protected with ~75% offtakes locked, reducing commodity sensitivity and supporting sustainability EBITDA trajectory .
  • Residential line margin now ~20%; continued shedding of low‑margin volume and tech adoption should sustain margin mix improvement through 2025/early 2026 .
  • Raised tuck‑in acquisition outlook ($80–$125M revenue) and ongoing pipeline should bolster inorganic growth and network advantages .
  • Near‑term focus: monitor Q2 seasonality recovery post‑weather, Healthcare margin progression, sustainability project commissioning cadence, and detailed long‑term targets at June Investor Day .