Waste management services provider Waste Management (NYSE: WM) missed Wall Street’s revenue expectations in Q4 CY2025, but sales rose 7.1% year on year to $6.31 billion. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $26.53 billion at the midpoint. Its non-GAAP profit of $1.93 per share was 0.9% below analysts’ consensus estimates.

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StockStory’s Take

Waste Management’s fourth quarter was marked by a negative market reaction, as both revenue and non-GAAP profit per share fell short of Wall Street’s expectations. Management attributed the results to ongoing cost optimization, disciplined pricing, and operational improvements in its core collection and disposal business. CEO James Fish highlighted that lower labor and maintenance costs, driven by investments in fleet and technology, improved operating leverage even as residential volume declined due to intentional shedding of low-margin accounts. The integration of Healthcare Solutions also contributed to margin gains, with Fish noting, “Customer service scores have improved to levels above our Legacy Business.”

Looking forward, Waste Management’s guidance is shaped by anticipated margin growth, ongoing synergy realization from the Healthcare Solutions segment, and expanding sustainability businesses. Management emphasized further cost reductions, pricing initiatives, and technology-driven efficiencies as key pillars. Fish stated that cross-selling opportunities and improvements in back-office processes should drive better price realization and volume growth, while CFO David Reed forecast continued free cash flow expansion. Investments in renewable natural gas and recycling automation are expected to underpin margin improvement, though management acknowledged lingering headwinds from lost Healthcare Solutions accounts and commodity price volatility.

Key Insights from Management’s Remarks

Management cited disciplined pricing, structural cost improvements, and progress in integrating Healthcare Solutions as primary drivers of Q4 performance, while lower-than-expected sales reflected volume softness in certain segments and the impact of lost accounts.

• Cost discipline and technology: Investments in newer trucks, automation, and connected fleet technology reduced repair, maintenance, and labor costs. Management pointed to a decrease in average fleet age and connected truck data, which improved productivity and lowered reliance on external services.

• Healthcare Solutions integration: Integration of the Healthcare Solutions business drove significant SG&A cost reductions and improved customer service metrics. Fish highlighted that customer satisfaction scores are now higher than in the legacy Waste Management business, and SG&A as a percentage of revenue is on track to drop below 10% company-wide.

• Pricing power and mix shift: Core price increases of over 6% in Q4 reflected the company’s ability to pass through higher service value, especially in commercial and landfill segments. Management continued to intentionally shed lower-margin residential accounts, shifting the business mix toward segments with stronger margins and operating leverage.

• Sustainability business expansion: The company commissioned seven new renewable natural gas facilities and upgraded five recycling centers, driving 22% EBITDA growth in recycling despite a 20% decline in commodity prices. Management expects sustainability-related EBITDA to triple by 2027, fueled by these investments.

• Operational excellence in core business: The core collection and disposal segment delivered margin expansion through process optimization, automation, and route planning. Management believes structural changes in cost base and frontline retention are durable and will continue to support margin gains.

Drivers of Future Performance

Waste Management’s outlook is driven by continued margin expansion, integration benefits from Healthcare Solutions, and growth in sustainability segments, balanced against headwinds from lost accounts and commodity price trends.

• Margin expansion through cost management: Management expects further margin gains in 2026 from disciplined pricing, continued automation, and leveraging technology across operations. Operating expenses as a percentage of revenue are projected to decline as fleet investments and connected truck initiatives mature, driving long-term cost efficiencies.

• Sustainability and recycling growth: Investments in renewable natural gas and recycling automation are set to boost high-margin revenue streams. Management noted that while recycled commodity prices remain volatile, operational improvements and new facilities are expected to support steady EBITDA growth from sustainability businesses.

• Healthcare Solutions synergy realization: The company aims to capture additional cost synergies and cross-selling benefits from the Healthcare Solutions integration. Management anticipates improved price realization and customer retention as back-office process enhancements and system upgrades reduce credit memos and customer churn, though some lost accounts will remain a headwind until late 2026.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely monitor (1) execution of Healthcare Solutions integration and the pace of synergy capture, (2) progress in scaling renewable natural gas and recycling businesses amid commodity price fluctuations, and (3) sustained margin expansion from continued cost optimization and automation. Additional focus will be on adoption of new technology platforms and the effectiveness of cross-selling efforts.

Waste Management currently trades at $222.15, down from $231.49 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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