WASTE MANAGEMENT (WM)·Q4 2025 Earnings Summary

WM Misses Q4 Revenue & EPS But Guides to 29% Free Cash Flow Growth in 2026

January 29, 2026 · by Fintool AI Agent

Waste Management (NYSE: WM) reported Q4 2025 results that missed on the top and bottom lines, with revenue of $6.31 billion falling 1.2% short of consensus and adjusted EPS of $1.93 missing by 0.9%. However, EBITDA beat expectations, and the company achieved operating expenses below 60% of revenue for the first time in company history. The stock fell approximately 2.5% following earnings to ~$225.70.

The story beneath the surface is constructive. Full-year 2025 delivered record operating expense efficiency, cash from operations grew over 12%, and management guided to 29% free cash flow growth in 2026 alongside $3.5 billion in planned shareholder returns. CEO Jim Fish said the company is "optimistic" about the macro environment, noting industrial volumes have bounced back from -3% to -4% declines to nearly flat.

Did WM Beat Earnings in Q4 2025?

No — WM missed on both revenue and adjusted EPS, though adjusted operating EBITDA beat consensus and operating costs hit record lows.

*Values retrieved from S&P Global

The revenue miss was driven by lower commodity prices in the Recycling Processing and Renewable Energy segments, while Healthcare Solutions continued ramping integration efforts. However, Q4 marked the third consecutive quarter with operating expenses below 60%, showcasing structural cost improvements.

Full-Year 2025 Results

The full-year picture looks stronger. WM delivered record operating expense efficiency and generated significant cash flow growth:

CEO Jim Fish called 2025 "a year of disciplined execution," highlighting that the company achieved its best-ever operating expenses as a percentage of revenue for both Q4 and the full year.

What Did Management Guide for 2026?

WM provided robust 2026 guidance, with the standout metric being a nearly 30% increase in free cash flow at the midpoint:

Key Guidance Drivers

Pricing remains strong: Management expects Collection and Disposal core price of 5.4-5.8% and yield of 3.2-3.6% in 2026.

Sustainability projects contributing: Recycling Processing, Renewable Energy, and landfill gas royalties combined are expected to add $235-255M of adjusted operating EBITDA in 2026, approaching $1 billion by 2027.

Capital discipline: Sustainability growth capital will drop more than $400 million year-over-year, while capital to support the business declines by about $100 million.

Healthcare Solutions progress: Revenue expected to grow ~3% in 2026, with margin expansion driven by SG&A synergies now that operations are locally managed.

How Did the Stock React?

WM shares fell approximately 2.5% following the earnings release and call, declining from $231.60 to ~$225.70.

The reaction suggests investors are weighing the near-term revenue and EPS miss against the strong operational execution and cash flow guidance. The stock is trading above both its 50-day ($218.31) and 200-day ($223.12) moving averages, indicating the longer-term uptrend remains intact.

Over the past 12 months, WM shares have gained approximately 16%, outperforming the broader market despite integration challenges from the Stericycle acquisition. The 52-week range is $194.11 - $242.58.

What Changed From Last Quarter?

Several notable shifts from Q3 2025:

1. Healthcare Solutions Integration Complete: The company achieved its targeted integration of Healthcare Solutions operations into the field management structure during Q4 (within the last 120 days). Customer service metrics now exceed legacy business levels, and customer call volume is trending down. Management expects this to be "a great platform to continue to drive real expansion in margins."

2. Operating Costs Hit Historic Low: Q4 marked the third consecutive quarter with operating expenses below 60% of revenue. Full-year 2025 finished at 59.5% — the first time in company history below 60%.

3. Recycling Commodity Prices Declined: The blended average price for single-stream recycled commodities dropped to ~$62/ton in Q4 vs ~$87/ton in Q4 2024, creating a headwind. Management expects $70/ton for 2026, with improvement in the second half as fiber prices recover.

4. Share Repurchases Resuming: After pausing buybacks to deleverage following the Stericycle deal, WM expects to resume share repurchases "this quarter" (Q1 2026). The new $3 billion share repurchase program was authorized in December.

5. Dividend Increase Announced: The Board approved a 14.5% increase in the planned quarterly dividend rate for 2026, the company's 23rd consecutive year of dividend growth.

6. Leverage Ratio Progress: The company reached a leverage ratio of 3.1x at year-end and expects to reach the 2.5x-3.0x target range during 2026.

7. Industrial Volumes Recovering: After being down 3-4% for the past 7-8 quarters, industrial volumes have bounced back to "almost flat," which management views as an encouraging leading indicator.

Segment Performance

Legacy Business (Solid Waste)

The core solid waste business delivered steady results with margin expansion:

Collection and Disposal core price was 6.3% for full-year 2025 with yield of 3.8%, demonstrating continued pricing power.

Healthcare Solutions

The former Stericycle business showed meaningful margin improvement:

Full-year Healthcare Solutions adjusted EBITDA margin improved to 16.9% from 15.1% in Q4 2024 (which represented the first quarter post-acquisition). SG&A as a percentage of revenue improved dramatically from 38.5% to 21.1% on an adjusted basis.

Sustainability Segments

Recycling Processing and Renewable Energy faced commodity headwinds:

Management expects sustainability businesses to contribute $235-255M of incremental adjusted EBITDA in 2026, with the portfolio approaching $1 billion in contributions by 2027 at current market prices.

Capital Allocation Priorities

WM outlined a clear capital allocation framework for 2026:

Total shareholder returns of approximately $3.5 billion represent the company's commitment to returning value while deleveraging toward its 2.5x-3.0x target leverage ratio.

Q&A Highlights

The earnings call Q&A session covered several key topics investors focused on:

Macro Outlook: "Optimistic"

CEO Jim Fish was notably bullish on the economy: "I might even remove the word cautious. I think we're optimistic about the macroeconomy." Key indicators:

• Industrial volumes bounced back from -3% to -4% declines to nearly flat
• Special waste pipeline remains strong, which management views as a leading indicator
• C&D (construction & demolition) was +3.4% for the year vs. negative in 2024

Healthcare Solutions: Integration Complete, Cross-Selling Ahead

Management emphasized significant progress on the Stericycle integration:

• Customer service metrics now exceed legacy business levels
• Credit memos (used to clean up past due receivables) peaked in Q4 and should decline in 2026
• Revenue split: approximately 2/3 medical waste, 1/3 document destruction
• On the $50M cross-selling synergy target: "If I were a betting man, I would take the over"

Operational Excellence: Record Efficiency

COO John Morris highlighted structural cost improvements:

• Driver turnover at 15.7% — lowest level of the year
• Repair and maintenance costs improved substantially, driven by younger fleet and optimized maintenance model
• Collection and disposal EBITDA margin hit 39% — an all-time high
• Customer churn remains around 10%, bouncing between 8-11% quarter to quarter

Technology Investments: Early Innings on Post-Collection

Management outlined their tech roadmap:

• Connected truck platform expanded to automated residential fleet, now in "late middle innings"
• Connected landfill initiative is "early innings" with IoT-enabled heavy equipment
• AI and technology delivering labor savings and premium pricing in recycling

RNG Business: Volume Doubling

The renewable natural gas business is scaling rapidly:

• Volume doubling from ~10 million MMBtu to 21-22+ million in 2026
• 60% of 2026 volumes contracted
• RIN pricing expected to hold steady at $2.30-$2.40
• Voluntary market: U.S. softer, but Canada, U.K., and international markets strong

Recycling Commodity Outlook

CFO David Reed provided color on recycling prices:

• Q4 2025 blended commodity price: $62/ton
• 2026 outlook: $70/ton average, with first half at $60-65 and ramping in second half
• Green shoots emerging on fiber as larger mills look for OCC material
• Tariff uncertainty lifting should help OCC prices recover

2027 Targets: "Estimates, Not Guidance"

When asked about 2027 financial targets from the June 2025 Investor Day:

"Those were estimates... about as far out as we can look is 12 months. It's hard to look at things like commodity prices 18-24 months out. I wouldn't rely on those as guidance... But I will say this about 2027: we don't see anything on the horizon that's concerning for us."

Wildfire Impact

Q2 2025 wildfire cleanup volumes created tough comps for 2026:

• $82 million EBITDA benefit in 2025 that won't repeat
• 50 basis points volume headwind in 2026 guidance
• Normalized for wildfires, 2026 EBITDA growth is 7.4% vs. reported 6.2%

Key Management Quotes

CEO Jim Fish on 2025 execution:

"We're pleased to report another year of outstanding results in 2025, including a record performance in operating expenses as a percent of revenue. This performance, combined with our disciplined approach to pricing, drove full-year Operating EBITDA margin 150 basis points higher in the legacy business."

On macro optimism:

"Regarding the macroeconomy... I might even remove the word cautious. I think we're optimistic about the macroeconomy. When we look at our own internal figures... industrial has bounced back to almost flat. So that's an encouraging sign for us."

COO John Morris on cost structure:

"We finished 2025 at 59.5%, which is the first time in company history that operating expenses have come in below 60% for a year, with each quarter of 2025 improving sequentially. We are fundamentally changing our cost structure through the investments we're making in our people, technology, and processes. 2025 was the year we proved the change is real and durable."

CEO Jim Fish on Healthcare Solutions cross-selling:

"Cross-selling, which we put $50 million in cross-selling in the EBITDA synergy number back in June of last year... If I were a betting man, I would take the over on that, because in talking to our area leaders last week, almost to a person, they were very encouraged by what they're seeing from their sales folks in terms of cross-selling."

On pricing power:

"Core price for next year, 5.6%, it's a 250 basis point delta to our forecasted cost inflation. I don't know how that measures up historically, but it's got to be one of the bigger ones for us."

Bottom Line

WM missed Q4 2025 revenue and EPS estimates modestly, but the underlying business fundamentals remain strong. The company achieved record operating efficiency with operating expenses below 60% for the first time in company history, delivered significant cash flow growth, and provided guidance for nearly 30% free cash flow expansion in 2026.

Key takeaways:

• Operating excellence: Record OpEx at 59.5% of revenue, C&D margins at all-time high 39%
• Macro optimism: Industrial volumes bouncing back, special waste pipeline strong
• Free cash flow inflection: ~$860M more FCF guided in 2026 vs 2025, with 46%+ EBITDA-to-FCF conversion
• Capital returns: $3.5B to shareholders in 2026 (14.5% dividend increase + ~$2B buybacks)
• Healthcare Solutions: Integration complete, customer service now above legacy levels, cross-selling exceeding expectations
• Sustainability: RNG volume doubling, 60% contracted for 2026, approaching $1B EBITDA contribution by 2027
• Pricing power: 250 basis point spread between core price (5.6%) and cost inflation expected in 2026

The stock's ~2.5% decline appears to reflect near-term revenue and EPS misses, but the operational execution and FCF growth trajectory suggest the business model is strengthening.

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Analysis based on Q4 2025 earnings release, 8-K filing, and earnings call transcript from January 29, 2026.