Q4 2024 Earnings Summary
- WM expects to exceed its previous target range for Investment Tax Credit (ITC) benefits, with $220 million anticipated in 2025 and $135 million captured in 2024, surpassing the initial $250 million to $350 million range. This enhancement in cash flow is due to the company's focus on maximizing ITC through domestic content in projects.
- The Stericycle acquisition is performing better than expected, with WM projecting approximately $460 million in EBITDA for WM Healthcare Solutions in 2025, up from an implied $350 million in 2024. This includes $85 million to $90 million of synergy capture and a 9% organic growth rate, significantly boosting overall EBITDA.
- Significant contributions are expected from growth investments in recycling and renewable natural gas (RNG), with $190 million anticipated in 2025 from these initiatives. Tailwinds in both businesses, along with new projects coming online, are expected to positively impact earnings.
- WM's growth projections depend heavily on achieving significant synergies from the Stericycle acquisition, planning for $85 million to $90 million in synergy capture in 2025. If these synergies do not materialize as expected, the projected increase in EBITDA to approximately $460 million may be at risk.
- WM is experiencing softness in industrial volumes, particularly in industrial hauls, and does not expect a significant rebound in 2025. This ongoing weakness could negatively impact overall growth.
- Capital expenditures for Renewable Natural Gas (RNG) projects have increased compared to initial projections. While returns are expected to be in line, higher capital investment may pressure return on invested capital if revenues or margins do not meet expectations.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +13% (Q4 2024: $5,893M vs Q4 2023: $5,217M) | The revenue increase is driven by higher yields in the Collection and Disposal businesses, increased landfill volumes, and strategic acquisitions. Earlier quarters already showed improvements from factors such as a $123M gain in Q3 2023 due to higher volumes and yield improvements, which set the stage for robust revenue performance in Q4 2024. |
Operating Income | +17% (Q4 2024: $919M vs Q4 2023: $785M) | Operating income improved thanks to price increases, higher landfill volumes, and gains on asset sales that improved operational efficiency. These improvements build on prior period cost optimization efforts and margin expansion—such as those noted in Q3 2024—demonstrating a continued trend in enhancing operational performance. |
Net Income | +284% (Q4 2024: $1,894M vs Q4 2023: $493M) | The remarkable jump in net income is attributable to a combination of significantly higher revenues and operating efficiencies. Factors include improved margins, cost management, and possibly one-off items or favorable non-operating gains. Building on the incremental gains seen in earlier periods (with Q3 2024 already showing strong operational performance), these elements compounded dramatically in Q4 2024. |
Basic EPS | +21% (Q4 2024: $1.49 vs Q4 2023: $1.23) | EPS growth reflects the stronger underlying profitability driven by revenue expansion and operational leverage. The improvements in operating income and net income seen in earlier periods, combined with disciplined cost management, have boosted the earnings per share compared to the prior period. |
Capital Expenditures | Swing from +$4,748M in Q4 2023 to -$5,347M in Q4 2024 | The marked shift in CapEx is driven by substantial sustainability investments in recycling processing and WM Renewable Energy, cost inflation, and an acceleration of spending into Q4 2024. In previous periods, a portion of planned investments had been deferred; the acceleration now reflects a deliberate move to meet long‑term sustainability targets and project timelines. |
Interest Expense | +57% (Q4 2024: $201M vs Q4 2023: $128M) | Increased interest expense is primarily due to higher average debt balances raised to fund growth initiatives along with an approximately 20–90 basis point increase in borrowing rates. This trend follows earlier period adjustments, including a shift from floating-rate to fixed-rate debt refinancing to manage cost certainty. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Commodity pricing | Q4 2024 | $85/ton | no new guidance | no new guidance |
Operating EBITDA | FY 2024 | ~$6.5B (≈10% growth) | no new guidance | no new guidance |
Free Cash Flow | FY 2024 | High end of $2.15B | no new guidance | no new guidance |
Capital Expenditures | FY 2024 | $3.15B–$3.25B | no new guidance | no new guidance |
Investment Tax Credits | FY 2024 | $145M | no new guidance | no new guidance |
Sustainability EBITDA | FY 2024 | $120M–$130M | no new guidance | no new guidance |
Investment Tax Credits (ITC) | FY 2025 | no prior guidance | $220M | no prior guidance |
Operating EBITDA Growth (Collection & Disposal) | FY 2025 | no prior guidance |
| no prior guidance |
Sustainability Segments | FY 2025 | no prior guidance | $150M operating EBITDA growth | no prior guidance |
Total Company Operating EBITDA Growth | FY 2025 | no prior guidance | ~15% at midpoint (≈$1B growth) | no prior guidance |
Stericycle/Healthcare Revenue | FY 2025 | no prior guidance | $2.6B | no prior guidance |
Stericycle/Healthcare EBITDA | FY 2025 | no prior guidance | $460M (includes $85M–$90M synergy capture, 9% base growth) | no prior guidance |
Free Cash Flow | FY 2025 | no prior guidance | Expected increase, offset by $350M–$400M interest, $75M–$100M taxes | no prior guidance |
Yield | FY 2025 | no prior guidance | 4.0%–4.2% | no prior guidance |
Core Pricing | FY 2025 | no prior guidance | 5.8%–6.2% | no prior guidance |
Volume Growth | FY 2025 | no prior guidance | 0.5 points | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Softness in Industrial Volumes | Mentioned each quarter (Q1–Q3 2024) as consistently weak, tied to broader industrial slowdown. | Still the slowest segment overall; no major rebound expected in 2025. | Recurring negative sentiment; focus on offsetting softness through other segments. |
Stericycle Acquisition Synergy | Introduced as $125M in synergies (Q2–Q3 2024), believed to be conservative. Not mentioned in Q1 2024. | Synergy estimates doubled, aiming for $460M in EBITDA in 2025, with $85–$90M in synergies. | Expanding synergy potential; a major driver for future growth. |
Automation and Cost Optimization | Consistently mentioned (Q1–Q3 2024) with reductions in labor cost, improved EBITDA margin, and efficiency gains. | Emphasized route automation with 400 bps margin improvement in residential. | Steadily improving operations with ongoing automation. |
Investment Tax Credit (ITC) Benefits | Regularly updated (Q1–Q3 2024); started at $120M, rose to $145M, with additional upside determined by domestic content rules. | Expect $220M in 2025, already $135M captured in 2024. | Consistent upward revisions; a significant tax and cash-flow benefit. |
Increased Leverage from Acquisition Financing | First noted in Q2 2024 (leverage to ~3.6×) and Q3 2024 (step-change in leverage, returning to target in 18–24 months). Not mentioned in Q1. | Cash interest up by $350–$400M in 2025; paused buybacks to reduce leverage to ~3.1× by end of 2025. | Maintaining investment-grade profile while managing Stericycle-driven leverage. |
Residential Volumes | Consistent intentional reduction (Q1–Q3 2024) of ~2.9%–3% to exit lower-margin segments. | 3.5% volume shedding to boost margins; ~400 bps margin improvement in residential. | Deliberate volume decline improves profitability. |
Recycling Expansions and Automation | Ongoing expansions since Q1 2024, with automation increasingly lowering labor costs and boosting margin. | Completed 10 facility upgrades with reduced operating costs; two new market entries. | Continual upgrades yielding higher capacity and efficiency. |
Renewable Natural Gas (RNG) | Discussed each quarter, with multiple projects under construction and growing capital outlays; strong returns and ITC offsets. | Five new facilities online; all but two finished by end of 2025, with 3-year payback. | Central to sustainability investment; major future earnings contributor. |
Opening Delays for New Facilities | Mention in Q3 2024 about extra steps (EPA approval), causing possible scheduling risks. No mention in Q2 or Q1. | Utility interconnects and final permits caused some delays; two facilities slip into 1H 2026. | New challenge in Q3–Q4; carefully monitored but not overly disruptive. |
Healthcare Solutions | Not previously mentioned (Q1–Q3 2024). | Projects ~9% EBITDA growth in 2025; $460M EBITDA includes synergies and cost reductions. | New vertical focus with strong synergy potential from Stericycle acquisition. |
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Stericycle Synergies
Q: Synergies from Stericycle are doubling to $250 million?
A: Yes, the synergy estimates for the WM Healthcare Solutions business (formerly Stericycle) have doubled from $125 million to $250 million. This increase focuses on the same three areas as initially planned: internalization, SG&A, and OpEx. While internalization remains the same, they have identified significantly larger opportunities in SG&A and OpEx, such as optimizing sales coverage and consolidating recycling capacity.
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2025 Collection and Disposal Growth
Q: Collection and disposal organic EBITDA up 7% despite headwinds?
A: Yes, the collection and disposal organic EBITDA is expected to grow approximately 7% in 2025, even with a $63 million CNG tax credit headwind ,. This solid growth is driven by strong pricing, cost management, and operational efficiency. The team has effectively managed costs, contributing to margin expansion.
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Sustainability Investments Contribution
Q: What's the outlook for sustainability contributions in 2025?
A: They expect significant tailwinds from sustainability investments, contributing $190 million in additional EBITDA in 2025. This includes benefits from new recycling facilities and renewable natural gas (RNG) plants. The company is optimistic about the positive impact rolling through the P&L.
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Core Pricing and Yield
Q: How is core pricing yield projected for 2025?
A: The core price guide is 5.8% to 6.2%, with a yield conversion of 4% to 4.2%. The lower conversion is due to business mix, particularly in the landfill business, which, while profitable, has a lower average unit rate. Cost management and pricing sophistication contribute to maintaining a favorable price-to-cost spread.
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Residential Volume Strategy
Q: Is there intentional shedding of residential volumes?
A: Yes, they are intentionally shedding about 3% to 3.5% of residential volumes ,. This strategy improves margins and reduces underperforming contracts, leading to a 400 basis point improvement in margins ,. They have reduced 900 routes and aim to continue this approach.
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RNG Projects Timeline
Q: Are renewable natural gas projects on schedule?
A: Yes, by the end of 2025, all but two RNG plants will have completed construction, with the remaining two finishing in early 2026. They feel more confident about utility interconnects and have visibility into completion timelines.