Waste Management stock weighs cash flow gains against margin risks

Waste Management stock traded at 211.15 euros on Lang & Schwarz at 14:31 CET on Wednesday, November 11, 0.31 percent below the Xetra close of Tuesday, November 10.

Investors are weighing stronger healthcare profitability and cash generation against fuel costs and softer collection volumes. In its third-quarter earnings release published on October 27, WM reported results for the period ended September 30, 2026.

Revenue growth meets margin pressure

Revenue increased 6.3 percent year over year to 6.846 billion US dollars. Adjusted operating EBITDA rose 5.8 percent to 2.121 billion US dollars, while adjusted operating EBITDA margin slipped to 31.0 percent from 31.1 percent in the prior-year quarter.

Pricing remained the main operating support. Collection and Disposal pricing contributed 40 basis points to adjusted operating EBITDA margin, and Healthcare Solutions added another 30 basis points. Higher fuel costs and increased risk-management costs each reduced the margin by 40 basis points, offsetting those gains.

Collection and Disposal volume declined 0.4 percent, or 0.5 percent on a workday-adjusted basis. WM linked the pressure to the deliberate exit from lower-margin residential business and commercial declines tied largely to earlier national-account broker losses. That combination leaves pricing power supporting revenue while underlying volume trends remain an issue for the next earnings cycle.

Healthcare integration advances

Healthcare Solutions revenue grew 3.7 percent in the quarter, and operating EBITDA increased by more than 30 percent. WM attributed the improvement to cost management, pricing growth and synergies from the integration of Stericycle.

Adjusted Healthcare Solutions operating EBITDA margin reached 22.4 percent. Adjusted selling, general and administrative expenses for the group fell to 9.3 percent of revenue, helped by cost discipline and integration savings. The segment progress gives WM an additional earnings lever, although management still faces the task of translating better pricing and efficiency into sustained volume growth.

Cash flow supports capital returns

Net cash from operating activities rose 12.0 percent in the first nine months to 4.867 billion US dollars. Free cash flow reached 3.009 billion US dollars, up more than 42 percent from the prior-year period.

WM returned 957 million US dollars to shareholders in the third quarter, including 580 million US dollars of share repurchases and 377 million US dollars of dividends. Through the first nine months, the company had repurchased 1.583 billion US dollars of stock and continued to expect total 2026 repurchases of 2 billion US dollars.

Guidance remains unchanged

Management affirmed its 2026 outlook. Revenue is expected at the high end of the 26.275 billion to 26.475 billion US dollar range, while adjusted operating EBITDA is expected within the 8.15 billion to 8.25 billion US dollar range. Free cash flow is also expected at the high end of the 3.75 billion to 3.85 billion US dollar range.

The investment case therefore rests on the durability of pricing, further Healthcare Solutions integration and continued cash conversion. Fuel expenses, risk-management costs and collection volumes remain the main variables that could limit margin expansion. The next earnings assessment will show whether healthcare gains can offset those pressures as WM moves toward 2027.

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