Waste Management, Inc. (WM) on Q1 2023 Results - Earnings Call Transcript

Operator: Hello. Thank you for standing by and welcome to the WM First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now like to hand the conference over to Ed Egl, Senior Director of Investor Relations. You may begin. Ed Egl: Thank you, Tawanda. Good morning everyone and thank you for joining us for our first quarter 2023 earnings conference call. With me this morning are Jim Fish, President and Chief Executive Officer; John Morris, Executive Vice President and Chief Operating Officer; and Devina Rankin, Executive Vice President and Chief Financial Officer. You will hear prepared comments from each of them today. Jim will cover high-level financials and provide a strategic update. John will cover an operating overview, and Devina will cover the details of the financials. Before we get started, please note that we have filed a Form 8-K this morning that includes the earnings press release and is available on our website at www.wm.com. The Form 8-K, the press release, and the schedules to the press release include important information. During the call, you will hear forward-looking statements, which are based on current expectations, projections, or opinions about future periods. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties are discussed in today's press release and in our filings with the SEC, including our most recent Form 10-K. John will discuss our results in the areas of yield and volume, which unless otherwise stated, are more specifically references to Internal Revenue Growth, or IRG, from yield or volume. During the call, Jim, John, and Devina will discuss operating EBITDA, which is income from operations before depreciation and amortization. Any comparisons, unless otherwise stated, will be with the first quarter of 2022. Net income, EPS, operating EBITDA, and margin and operating expense and margin results have been adjusted to enhance comparability by excluding certain items that management believes do not reflect our fundamental business performance or results of operation. These adjusted measures in addition to free cash flow, are non-GAAP measures. Please refer to the earnings press release tables, which can be found on the company's website at www.wm.com for reconciliations to the most comparable GAAP measures and additional information about our use of non-GAAP measures and non-GAAP projections. This call is being recorded and will be available 24 hours a day beginning approximately 1:00 PM Eastern Time today. To hear a replay of the call access the WM website at investors.wm.com. Time-sensitive information provided during today's call, which is occurring on April 27th, 2023, may no longer be accurate at the time of a replay. Any redistribution, retransmission, or rebroadcast of this call in any form without the expressed written consent of WM is prohibited. Now, I'll turn the call over to WM's President and CEO, Jim Fish. Jim Fish: Thanks Ed and thank you all for joining us. We're off to a solid start in 2023 with first quarter results, delivering on our expectations and keeping us on track to achieve our full year guidance. First quarter revenue grew 5% with continued strong organic growth in the collection and disposal business of 7%. We're pleased with these results, particularly when you consider the impact of West Coast weather disruptions on our operations. With that said, our first quarter performance was basically on our budget and our strategic priorities of maintaining strong price discipline, permanently reducing our operating and SG&A cost structure through business optimization, technology and automation and leveraging our sustainability platform for growth are right on track. Executing on these priorities will produce the robust short-term and long-term financial performance that we've projected. As you heard at our Sustainability Investor Day at the beginning of the month, we're very enthusiastic about how the growth in our renewable energy and recycling businesses strengthens WM's compelling investment thesis. We expect the investments that we're making over the next several years to provide meaningful operating EBITDA and free cash flow growth with impressive returns. We remain on track to bring online two new renewable natural gas facilities and seven newly automated material recovery facilities by the end of the year. We're also opening one new MRF in 2023 in the Greater Toronto area, which positions us strongly in the largest growth market in Canada. Even as these important parts of our operations grow our solid waste business will continue to make up the lion's share of our earnings, projected to generate roughly 85% of operating EBITDA in 2026. As a result, our focus on optimizing performance and reducing costs in the solid waste business through technology and automation is critically important and will serve to further separate us from our competition. One excellent example of this is the expansion of our customer self-service capabilities where we've reduced our call center department costs in the first quarter by more than 20% compared to last year, while at the same time maintaining or improving our Net Promoter Scores in the commercial and industrial lines of business. So far in 2023, the WM team continues to deliver strong performance. The investments we're making set us up to further differentiate our industry leading asset network and capabilities. When you combine these strategic positioning -- when you combine this strategic positioning with the essential nature of our service, our diverse customer base and our recurring revenue streams, it provides confidence in our ability to continue to reach our strong financial projections over the long-term. For the remainder of 2023, our outlook remains consistent with the full year guidance provided at the beginning of the year, including adjusted operating EBITDA growth of 7% at the midpoint and between 40 and 80 basis points of adjusted operating EBITDA margin expansion, driven by our collection and disposal business. In closing, I want to thank the 49,000 people behind WM's success this quarter and every quarter. Without this team, none of this would be possible. And I'll now turn the call over to John to discuss our operational results for the quarter. John Morris: Thanks Jim and good morning. 2023 has started off as planned and we're pleased to have achieved our first quarter targets. Overall adjusted operating EBITDA grew nearly 4% and operating EBITDA in the collection and disposal business grew 7% in the quarter. One area that exceeded our expectations was pricing as we continue to execute on our revenue management programs to recover cost increases and improve margins. As Jim mentioned, our first quarter organic revenue growth in the collection and disposal business was 7%. This growth was led by core price of 7.4%, which exceeded both last year and our plan for the first quarter. This strong core price translated into collection and disposal yield of 6.2%, a 70 basis point improvement compared with Q1 of 2022. We saw strong yield performance across all lines of business and are particularly proud of our post collection yield. We have consistently emphasized the importance of post collection pricing and in Q1, we delivered yield of 8.9% of our transfer stations, and 5.4% for landfill MSW, both increases from last year. In fact, the transfer station yield is a new high for that line of business, which is helping to offset, increasing cost of labor and transportation. Our collective focus continues to be striking the right balance between maximizing customer lifetime value and increasing price to recover higher costs. We remain confident that we can achieve our full year pricing expectations for core price of 6.5% to 7% and yield approaching 5.5%. Turning to volumes, first quarter collection and disposal volume grew 0.8%. Landfill volumes led the way with C&D volumes up almost 37% in the quarter, driven by the hurricane cleanup in Florida and MSW volumes increased by almost 3%. Special waste volumes moderated in the quarter due to the timing of event-driven work, but our pipeline remains robust, and we believe that those volumes will provide incremental revenue growth as we progress through Q2 and the balance of the year. Our collection volumes were down modestly in the quarter, driven by intentional steps we continue to take to price every contract to achieve acceptable returns. This has led to some non-regrettable volume losses in our residential and commercial business. With profitability improving in each line of business and contract wins with healthy price increases, we're pleased to see our differentiated service and disciplined approach to yield benefits. For the full year, we continue to expect flat overall volumes at the midpoint of our guidance. Turning to operating expenses, which increased 70 basis points as a percentage of revenue to 63%. I want to frame these results and then talk about the efforts in place to optimize our cost to serve in 2023 and over the long-term. There were two primary contributors to our first quarter results, the dilutive impact of recent acquisitions and continued inflationary cost pressure. As a reminder, we closed on about $365 million of acquisitions of solid waste and recycling businesses in the second half of the year. Integration costs and upfront dilutive margins of these acquisitions had about a 35 basis point impact in the quarter. While this impact was a little more than expected, overall, we're very pleased with the progress being made on creating value from these businesses. The remaining impact was due to persistent cost inflation, which was most significant in wages, repair and maintenance and subcontractor costs. The good news is we see signs of easing cost pressures and the steps we are taking to combat higher costs are also showing benefits. Frontline wage increases are now in the mid-single-digit range as compared to the high single to low double-digit increases that we saw in late 2021 and 2022. And we're starting to see truck orders fulfilled, which benefits every aspect of our cost structure because employee engagement is better, downtime on route is minimized, repair costs to reduce, and expensive rentals can be eliminated. Getting trucks delivered will also be key to residential automation. As we move from traditional rear load to automated side loaders, we're taking a helper off the back and getting about a 30% productivity pickup, which equates to lower driver technician and truck capital needs. We talked a lot about the work we're doing to optimize our cost to serve. Investments we are making in our people and processes are also important. We're always working to make WM a great safe place to work and delivering our team members of best-in-class compensation and benefits package. One of the benefits we know that comes from these efforts is improved retention, which then translates into even better customer service and optimized cost structure because our tenured drivers are the safest and most efficient. In the first quarter of 2023, we saw the best driver retention we've seen in two years. This positions us to drive down our training and overtime hours, improve overall efficiency, and most important, see continued improvement in our safety performance. In closing, I want to thank the entire WM team for the fantastic job they do safely and reliably serving our customers day in and day out. We've had a solid start to 2023 and look forward to building on our success. I'll now turn the call over to Devina to discuss our financial results in further detail. Devina Rankin: Thanks John and good morning. We're pleased to see our robust revenue growth and disciplined focus on cost control translate into solid operating and free cash flow. First quarter cash flow from operations of $1.04 billion is in line with our plan and a strong result, particularly when you consider higher cash interest and incentive compensation payments. Capital spending in the quarter totaled $660 million, with $504 million related to normal course capital to support our business and $156 million of spending on sustainability growth projects. On the capital front, there are two key takeaways. The first is that we're pleased with the continued progress on our sustainability growth projects relative to plan. The second is that truck deliveries are improving. At this time last year, we have received less than 50 trucks. This year, we received about 470. While this is certainly better and shows some easing of the significant supply chain constraints from a year ago, we're still waiting for truck deliveries we planned for 2022. These delays impact our team's ability to deliver on residential collection optimization objectives and targeted improvements in our maintenance cost per driver hour. So, while we're encouraged the worst of the recent uncertainty is behind us, we still need to see a more reliable delivery schedule from manufacturers. Our business generated free cash flow of $395 million in the first quarter and free cash flow before sustainability growth investments of $551 million, which puts us on track to deliver our full year guidance on this measure of between $2.6 billion and $2.7 billion. Even as we invest in high-return sustainability growth projects within our business, we continue to demonstrate our commitment to all of our capital allocation priorities. We returned $639 million to shareholders during the quarter, paying $289 million in dividends and repurchasing $350 million of our stock. We expect dividends to total about $1.1 billion this year. And with our outlook for strong earnings growth over the remainder of the year in a healthy balance sheet we expect to continue to repurchase our shares fairly ratably over the remainder of the year. Our leverage ratio at the end of the first quarter was 2 times, which is well within our target ratio of between 2.5 and 3 times. About 18% of our total debt portfolio is at variable rates and our pretax weighted average cost of debt for the quarter was about 3.7%. Our balance sheet is strong, and we remain well-positioned to fund growth investments. Turning to SG&A, we're pleased with the progress we're making to drive leverage from a more efficient cost structure. In the first quarter, SG&A costs were essentially flat with the same period in the prior year, and spending as a percentage of revenue improved by 40 basis points to 9.7%. These results demonstrate our success in rationalizing costs and optimizing our sales and customer experience functions. We expect our investments to continue to drive improvement in SG&A costs and put us on a path toward a permanently reduced SG&A cost structure. Our operating EBITDA margin performance for the quarter was generally in line with our expectations. The 40 basis point margin decline year-over-year is due to three things; one, commodity price impacts on our renewable energy and recycling businesses, which created a 50 basis point margin headwind. Two, the dilutive impact of acquisitions completed in late 2022, which had about a 40 basis point impact. And three, cost pressure in our collection and just local business from wage inflation and delayed truck deliveries, which we estimate had about a 20 basis point impact. These margin impacts were offset in part by a 40 basis point improvement in SG&A and a 30 basis point benefit from the timing of alternative fuel tax credit. Our disciplined organic revenue growth and focus on optimization and cost control are expected to drive year-over-year margin expansion for the remainder of the year, particularly in the third and fourth quarters. In closing, the WM team has delivered a solid start to the year, which sets us up for another year of strong financial growth in 2023. I can't thank our hard-working team members enough for all of their contributions to our success. With that, Tawanda, let's open the line for questions. Operator: Thank you. Our first question comes from the line of Bryan Burgmeier with Citi. Your line is open. Bryan Burgmeier: Good morning. Thanks for taking my question. EBITDA margins were slight in 1Q, at least relative to the sell-side, I appreciate all the detail you provided there. You reiterated guidance for the 80 basis points improvement for 2023. So, do you think we see EBITDA margins inflect in 2Q or at least maybe approach flat and they inflect in 3Q? Just a little bit of timing -- a little bit detail about how much about the timing of improvement on margins. Devina Rankin: Yes, it's a great question. We definitely see the lion's share of that contribution of EBITDA margin coming in the third and fourth quarters. We do expect some improvement from what we saw in the first quarter. I want to point out a couple of things that happened in Q1 that we don't see as indicative of the margins that we'll expect for the remainder of the year. As I mentioned on the commodity businesses, that was 50 basis points of the impact in the quarter. We expected our first quarter to be the hardest comp on a year-over-year basis from commodity prices, and so we think most of that impact starts to abate beginning in Q2. But as I said, most of that really comes in Q3 and Q4 when the year-over-year comparisons on commodity prices improve. On the dilutive impact of M&A at 40 basis points, that was about half solid waste and half recycling. And like I said, we're pleased with the traction that we're seeing in each of those businesses on the recycling side because that business is in a development phase. We knew that there would be some upfront costs associated with integrating that business. They just happen to be higher than our expectations. We don't expect that to continue over the remainder of the year. So, that's another thing that gives us confidence. On the solid waste side, we took a really important step that's team member-focused and an investment in our frontline by making the MLK holiday across the entire organization. That emphasizes our focus on people first, but that is a Q1-only event, and that's something else that will abate for the rest of the year. So, those are the things that give us confidence that the Q1 results of 40 basis points will exceed what you see for the remainder of the year. And in fact, we do see some of that coming out in Q2, but Q3 and Q4 is really where you start to see some strong results. Bryan Burgmeier: Great. Thanks for the extra detail. And last question for me. Maybe just how did the value of the recycled commodities in 1Q compare to your expectations? Can you share what you might be expecting for 2Q? And apologies if I missed this, but are you still looking for a $70 a ton commodity basket for 2023? Thanks and I'll turn it over. Answer Jim Fish: Yes. Bryan, we are still looking to see $70 for 2023. The trend has been good and it's what we anticipated. So, at the end of Q4, we were at $47. Q1 was at $54, but it got better as you went through the quarter. So, $57 was our average in the month of March. And then as we're getting into April, we're seeing that continue to improve. Couple of things are helping us. The mill capacity that's coming online is helping with demand on the back end. We're also seeing a pretty significant uptick in pricing for plastics, for aluminums and a little bit for OCC. So, we are still sticking with our $70 and feel pretty confident in that. Operator: Thank you. Our next question comes from the line of Toni Kaplan with Morgan Stanley. Your line is open. Toni Kaplan: Thanks so much. You mentioned in the prepared remarks, getting the additional truck orders fulfilled and that getting more back to normal. How quickly can we see that productivity impact into your results? And could that be upside to the guidance for this year? Or is that already embedded in the guide, that it returns to more of a normal trend? John Morris: No, So, I think -- listen, we're thrilled that the supply chain and truck deliveries are starting to abate. As Devina mentioned, we almost -- we delivered almost 500 trucks year-to-date versus 50 last year. It takes 30 to 45 days to get those vehicles sort of on the road and get the older vehicles off. So, there's a little bit of a lag. That was considered when we put together our plan for EBITDA and EBITDA margin this year. We went back and took a look before the call. We probably -- if you go back to kind of post-COVID, we're probably lagging 2,000-plus vehicles from what our fleet plan would have been. So, we're going to get a full complement of trucks this year, probably 1,500 to 1,600 is what we think. So, we're going to continue to get those assets in play as quick as we can and drive the benefit. But keep in mind, part of the M&R pressure is that -- it's not just the trucks we didn't get in 2022, it's we caught up in 2021 from 2022, 2022 to 2023, et cetera. Toni Kaplan: Great. I wanted to just ask my follow-up on the sort of more recent, like April, late March trends. Have you seen those improving? Or has there been any change? Obviously, the banking crisis sort of doesn't impact your business as much as some of the other business services companies. But any heightened recession concerns with your customers? Like any change in conversations that you're having with customers? Thanks. Jim Fish: So, John can address the cost side and what we're seeing so far. I would tell you that as far as the overall macro economy, we've been looking at it closely because it seems as if every day, somebody comes out with a different projection. Maybe the best indicators for us are things like churn and price rollbacks. Those have been at the historic low end of our ranges and continue to be there. Also looking at some of our volume numbers, especially MSW, MSW was 2.7%. It's around 3% still. So, those are pretty good signs for the overall economy. Now we tend to be kind of at the back end. So, sometimes we don't see the early signs. But everything we're looking at still seems to be okay. It doesn't look like a blowout for sure, but it doesn't look like the bottom is falling out. So, that's encouraging. John Morris: I think on the cost side, Toni, I addressed the M&R and some of the challenges we have seen here. The good news is we're starting to open up. On the labor front, I said in my prepared comments, we were close to high single, low double digits, and that's moderated back down to mid-single-digits. So, that certainly is a benefit going forward throughout the year. Subcontractors, we're still seeing a little bit of lag there, and it's really more of third-party transporters. But as you saw within our post-collection pricing and more specifically our transfer stations, we continue to address that through the revenue quality of the remote gates at or the transfer station. I think -- when it all comes down to it, I think we talk about automation and optimization. It's really about permanently lowering our operating expense exposure. And that's really, as Jim mentioned, what we're really focused on for the balance of the year. Toni Kaplan: Fantastic. Thank you. Operator: Thank you. Our next question comes from the line of Jerry Revich with Goldman Sachs. Your line is open. Jerry Revich: Yes, hi, good morning everyone. Jim Fish: Good morning. Jerry Revich: Devina, I'm wondering if you can talk about second quarter. So, normal seasonality is your margins are up about 200 basis points second quarter versus first quarter. And you mentioned a number of one-offs in the first quarter. So, I'm wondering, as you're thinking about the cadence, is there a potential for margins to be up stronger sequentially than the typical two points that we've seen in the past. Devina Rankin: Yes, it's a great question, Jerry. And that's some of the analysis we've been particularly honed in and on and looking at. And that is our expectation, is that the first quarter of 2023 had some margin pressures that we see as more related to 2023 specifically, such that the normal seasonal uptick that we see from a revenue perspective will provide the typical expansion. And then on top of that, we'll have some added benefits from lapping some of the commodity price impacts I've talked about. We're also expecting to see some strong accretive revenue come back in the collection line of business, in particular as our differentiated service model really pays some dividends in terms of our national accounts business where we are going to lap some of the contracts' expirations and we're going to see some contracts return. So, those are the things that give us so much confidence that Q2 really will be outsized relative to a typical year. Jerry Revich: That's great. So, really you have high visibility on essentially getting to your margin run rate as early as 2Q. Okay. And can I ask on the post-collection pricing momentum that, John, you mentioned in the prepared remarks. How much more momentum is there, I would have presumed a chunk of that is CPI pricing rolling. But can you just expand -- and really nice to see the strong numbers, both in transfer stations and landfills. John Morris: Yes, Jerry. I would tell you that's something we've been working on, and that's been a tougher hill to climb, obviously, because those are bigger chunks of a volume and big customers when you're making those decisions. I think as I mentioned, the transportation piece, and a lot of that is labor and fuel, if you will, has continued to persist, which is why one of the reasons why you continue to see us be as aggressive as we are on the transfer station side. And on the landfill side, again, the cost of constructing and operating as landfills is not getting cheaper. So, part of our pricing strategy, obviously, a minimum to recover our investment there, but also look for margin improvement where that opportunity exists. Jim Fish: I think, Jerry, it's also worth mentioning that our team is, over the years -- the last couple of years has really come to appreciate the fact that landfill aerospace is a precious commodity and if you think about particularly the East Coast, that space doesn't come cheaply and it's -- there's a finite life to all of those. So, we need to price it that way. And that's, in large part, what you're seeing out of transportation but also largely landfill pricing. Jerry Revich: And Jim, just one last one, if I could. SG&A has obviously been a big focus for you, and really strong cost control this quarter. Can you talk about, did we get a full quarter run rate out of the initiatives that you mentioned on the call center side this quarter? Or is that momentum building over the course of the year? Jim Fish: So, on the call center side, we did not refill about 580 positions last year and there are another 300 that we will choose not to refill this year. So, I would say we're probably -- we were probably 60% of the way there on that piece. But some of those other positions that we've talked about, John mentioned it, which is replacing reloaders with ASOs. And he talked about 30% productivity pick up there. We're not -- because we haven't been receiving the trucks, I mean, you can't make that swap obviously without the truck. There's some work that's involved with our public sector team. They have to talk to our customers and make sure that they're comfortable with going to trash just being in one of those totters as opposed to everything sitting on the curve. But -- and they've made nice progress there. But as we do that, we think there's another probably up to 2,000 positions that are helpful positions that we just will choose not to refill. And as you can imagine, those have very high turnover, somewhere in the neighborhood of 50% for those. So, once those trucks come in, once we've talked to the customer base, we will transition those. And maybe the most important piece that John mentioned is it helps us from a safety standpoint. 70% our injuries happen in the residential line of business. And I would guess that 90% of that 70% are on rear loaders. Jerry Revich: Very interesting. Thank you. Operator: Thank you. Our next question comes from the line of Tyler Brown with Raymond James. Tyler Brown: Hey good morning. Devina Rankin: Good morning. Tyler Brown: Hey Jim, John, just I was looking back through the Q4 transcript, and I'm not really sure I saw it. But can you just kind of remind us what is embedded -- or the level of unit cost inflation that's kind of embedded in the 2023 guide and maybe where are you today? Devina Rankin: Sure. In terms of unit cost inflation, we expected in 2023 about 4% to 5% unit cost inflation for the year. And when we look at Q1, it was certainly higher than that. But our expectation is that, that moderates. And as John has talked about, in particular, labor and repair and maintenance are expected to benefit from the actions that we saw early signs of as we looked at February, March, but we expect to continue to gain momentum over the remainder of the year. Tyler Brown: Right. Okay. So, that kind of naturally slopes down. So, look, Jim, I don't want to get into the comparison game, but one of your competitors showed core pricing accelerated in Q1. It looks like your pricing may be peaked in Q4. I get that there are a variety of factors at play. But I've got a lot of questions this morning. But just any thoughts on the pricing environment, your go-to-market strategy? And do you just feel comfortable that you can maintain a nice positive spread to unit cost inflation both over the short and long-term? Jim Fish: Yes. Look, I didn't see what their numbers were at. But I would tell you this, first of all, I looked back. Historically, we anticipated the question. And historically, Q1 has been the lowest yield for us over a period of probably a decade. It's almost always been the lowest yield number on a quarter-by-quarter basis. But when I look at how we're doing with things like rollback of price and churn, those are, as I said, near the bottom end of our historic ranges. And I also was very encouraged to see pricing in two particular places that we're encouraging: residential, which John talked about, and landfill and transfer. Those are -- we just talked about it with Jerry, but those were really important areas for us to kind of -- all three of those. When we talk about it probably four years ago, we're talking about something less than 1%. And now we're talking about much higher numbers, albeit in a higher inflation environment. But still, I think you're seeing the discipline there around pricing very strong. So, I don't know really what the other folks reported, but I would tell you, there's no loss of discipline whatsoever. There's really, I think, Tyler, three areas that we're all focused on for 2023, and those are top of line -- at the very top of the list has got to be price, and then a close second to that is what John has been talking about, which is cost control, both SG&A and OpEx and using technology to facilitate that. And then, of course, the third one is when we talked about three weeks ago, which are those sustainability investments. So, those three are really kind of our near-term focus that will help us out in the long-term. Tyler Brown: Okay, perfect. And then my last one, I got to kind of go back over this margin walk, there's a ton in there. So, make sure I've got it. So, commodities and RINs were a 50 basis point headwind, M&A was about a 40 basis point headwind. You mentioned something -- I think you said 30 basis points from a fuel tax credit. I was unclear, is that a hurt or help. And then you mentioned in higher incentive compensation, I wasn't sure if you were talking cash flow or EBITDA. And then is the holiday addition about a 50 basis point headwind as well as I would assume it's kind of like one less workday? Devina Rankin: Yes. So, let me take that in pieces. The alternative fuel tax credit was a help of 30 basis points, and that's a help because of timing. So, you might recall that last year, we got -- there was a delay in the approval of those tax credits by government. And so there was a delay in our recognition of those tax credit benefits until the third quarter of 2022. So, what you're seeing this year is that those are going to be recognized quarter-by-quarter. So, we got the benefit in Q1. We'll have another benefit in Q2 and then that moderates in Q3, reverses itself, and then normalizes beginning in Q4. On the dilutive impact from commodity businesses of 50 basis points, you had that right. Incentive compensation was cash flow. So, yes, that was a cash flow impact. When we gave our guidance for 2023, we talked about working capital being a headwind in the year. And a lot of that headwind, really all of that headwind was in the first quarter as anticipated because higher incentive compensation payments happened in Q1 because of the 2022 outperformance relative to our plan. So, that moderates and really starts to become a tailwind over the remainder of the year. On the solid waste side, when I was mentioning the MLK holiday, that was part of the 20 basis point margin headwind that we saw from the solid waste part of the business. What's really important there, I think, in terms of thinking about what it means for the rest of the year is that, that impact isn't something that repeats itself. It actually doesn't become a help necessarily, but it's not something that we see repeating over the remainder of the year because it was a onetime event. Jim Fish: And it was not -- there wasn't one less workday. We still had to work those days. It's just we paid everybody time and a half. Tyler Brown: Okay, that’s very helpful. Okay, perfect. Super helpful as usual. Thank you so much. Devina Rankin: Thanks Tyler. Operator: Thank you. Our next question comes from the line of Michael Hoffman with Stifel. Your line is open. Michael Hoffman: Hey WM, how is everybody today? Jim Fish: Good morning Michael. Devina Rankin: Hey. Michael Hoffman: So, John, what is the trend on service intervals, new business formation, temporary roll-off asset utilization? John Morris: So, the service interval piece, Michael, is still positive. That's the headline. In addition to the service intervals, though, as Jim mentioned in the commentary a few minutes ago, the other parts of that, that we're really paying close attention to is what the churn rate is doing and what the rollbacks are doing even as we continue to be aggressive on the pricing side. And those have all continued to stay static and in a good spot and service intervals are still positive. So we feel good about that. Devina Rankin: From an asset utilization perspective, Michael, I think it's important that as John mentioned, it takes 35 to 40 days to get those new trucks in service and on the road. That means that we've been holding on to some of our older vehicles longer. And so asset utilization, not necessarily where we like it to be. But that's because we've needed to be intentional about keeping our vehicles and maintaining them so that we meet all of our service needs for our customers. John Morris: So, this is anecdotal, Michael, but we did our business refused with all our areas last week. And one of our areas actually was scheduled to return some rental trucks which, as you can imagine, are done at a premium. And we were told, hey, your trucks are going to be -- and it wasn't a large amount of trucks, less than a dozen trucks. But this area turned their trucks back in and then we got delayed another 30 or 45 days on some of the delivery. So, to Devina's point, there's a little pensiveness by the field, and we understand it's to send those trucks back, whether it's rentals or surplus assets. The good news is, like we said, there's almost 500 trucks that are on the ground, not in service yet. So, when we think about rentals and surplus assets, we have a clear path for the rest of the year and more confidence in the delivery schedule that we're going to be able to take those out. Michael Hoffman: Okay. And then just to settle the on temporal losses. I mean, that's sort of a good canary in the coal mine about business activity. What's the temporal loss utilization look like? John Morris: I don't know, Michael, we've seen a meaningful movement there. I would tell you, we don't talk about weather, but there was a handful of areas on the West Coast where we were shut down for a few days and some kind of really odd weather. But other than that, it's been -- I think the temp story has been a consistent one. Michael Hoffman: Okay. And then, Devina, can you share something? I know it historically don't, but I think it helps put in perspective Tyler's question. Your 62 is a good number. But what's the mix of index versus open market? Because I think there's some waiting issue there that people should appreciate given that 70% of your index is happening now and it's a number from last summer, not the end of the calendar year. John Morris: So, we've said, Michael, about 40% of our revenue is indexed. It's not all CPI as we've talked about. The majority of that, though, really, as we all know, runs through that residential line of business. And that's when you look at the pricing and the yield results in residential, I think for the quarter, we were up $53 million in revenue. We're down about 29 in volume. So, we continue to down that path until we get to some acceptable spot there. And it's noteworthy that the residential line of business, as you can imagine, is one that eats a little more of the inflation, some of the other one due to the labor intensity and whatnot. But if you look at where CPI was last quarter or this quarter, you look at core price and yield, we're still pricing above that. So, we're getting traction even above that CPI number. Michael Hoffman: But just to be clear, the part of the drag on the 62 with people are looking sequentially is the number that's in the first half isn't the immediate -- just immediate CPI. It's actually -- well, one from last summer, which would be lower than the CPI that was at the end of the year. That's the subtlety of your model because so much of your business resets in the first half. It's not a negative. It's just everybody needs to understand it. Devina Rankin: Yes, you're right, Michael. About 70% of our resets are in the first half of the year, and those are all indexed to a year ago activity. And so we'll see some of that benefit as we go through the rest of the year in terms of where inflation headline numbers continue to be high. Michael Hoffman: Right. Okay. And then on the commodity side, the other pieces of your model are RINs in nat gas and electricity. Overall, you have an assumption all this would improve. I have a suspicion maybe you will end up with two lefts and a right versus two rights and a left to get to the same outcome. But do you feel comfortable about the whole mix, not just recycling that all of those things are going to collectively get to the right place relative to the guide? Jim Fish: I like the way you said that, Michael. I was trying to figure out a good way to say that. You said it better than I would. But you're right. I mean, it's -- in any big business, there's going to be a few things that work in our favor, a few things that work against us. RIN pricing is probably a little bit against us right now. We budgeted $2.30, and it's $2. So, that one may end up being a little bit of a headwind. But we've also gone through some of the tailwinds, too. I mean SG&A, is -- I'm not sure we've ever had an SG&A number as a percent of revenue below 10% for the first quarter because the revenue base is always low for Q1. So, we're doing a better job on SG&A than we actually anticipated. I could say the same thing about MSW volume or a couple of the other things. So, you're right. There's a few things that are coming in a little lower than our expectation. RIN pricing would be one of those. On the other side, recycle pricing, as we talked about a little bit earlier, is right on our expectations. So, we're pleased with that because I know there were a few that had questioned our $70 number, and that looks like it's probably going to hold. So, I think you're right about the fact that there's a whole bunch of pieces in play here. Michael Hoffman: Okay. And then last one for me. One of the things I've noticed that you have all been doing, and maybe it was perpetual, first of all, maybe it was just an outcome, is the gap between what you're getting in yield in collection versus the yield and post collection has been closing. How much more can that close? It's a good thing. Well, how much more can that close? Jim Fish: I think it will continue to close. And I said it a little bit earlier, but there's a real appreciation for the fact that especially landfill airspace is a precious commodity. Particularly when you think about it on the East Coast and on the West Coast, I mean, maybe not quite as much in the middle of the country, but definitely on the East Coast, I mean, you see it. Anybody who lives in New York sees it, anybody who lives in Boston sees it. And I'm not sure we've priced it that way over the years. You're seeing us price it that way. We recognize that these have a finite life to them. And so why fill them up with kind of low-priced tons when we can fill them up at a slower rate, maybe at higher price tons, preserve some of that airspace. Give us time to figure out our solution once those do ultimately go away. Michael Hoffman: Okay. Thanks for taking the questions. Looking forward to seeing you in New Orleans. Jim Fish: Thanks Michael. Operator: Thank you. Our next question comes from the line of Kevin Chiang with CIBC. Your line is open. Kevin Chiang: Hi, good morning. Thanks for taking my question here. Maybe just on -- in your prepared remarks, you talked about the MRF you opened in Toronto here. Just wondering how that positions you given the province -- if Ontario is looking to put in a producer responsibility legislation or as producer responsibility legislation? Does this MRF make you more competitive as you think of the opportunities stemming from that legislation? Jim Fish: I think it does, Ken, I think it puts us in a great position there. It's the highest growth province in Canada, and Toronto is the biggest city in Canada. So, it puts us in a really, really good position add to that -- that this MRF will be one of the new style MRF, so with a lot of automation in it. So, it comes to us, as any of our new MRF will, with lower labor cost, 30% is what we're seeing in terms of labor cost per unit with the automation that we're adding. So, we're excited about the MRF coming in to Toronto. It's, in our mind, it's a perfect place to put a new MRF. Kevin Chiang: Perfect. No, that makes a ton of sense. And maybe just the EPA did come out with, I guess, a Phase 3 proposal on heavy-duty vehicles, looking to continue to drive to some sort of net zero target over time. And I'm just wondering how you view that. I know you obviously had the curves here versus some of your peers on investing in CNG and RNG suites. But just given some of the stuff you've seen, not sure if you think that impacts your fleet strategy or maybe the need to accelerate some of the investments in electrification or other -- or some other type of propulsion system that gets you to some sort of GHG emission target based on the EPA's proposal here. John Morris: Yes, Kevin, I mean, listen, we've talked a lot about our CNG, RNG strategy and obviously really pleased with the way that's gone and with the outlook of that is, especially as we continue to bring on these R&D plans. But at the same time, we are continuing to look at other propulsion techniques, if you will. Electrification always comes to mind. People are talking about hydrogen. I think the good news is two things. One, we have our toe in all those ponds in terms of watching all the technology advancement and see how it's not only going to progress to commercialization, but commercialization through a heavy-duty fleet like ours, which are two distinctions. So, I think we're in a good spot there regardless of what the technologies. Our fleet strategy is evidenced by what we've done from diesel -- gen 1 diesel, gen 2 to CNG/RNG that we have the flexibility within our fleet plan to be able to pivot without really impacting the business. Jim Fish: I think, Kevin, one important point here about electrification is that it's not a surprise to anybody on this call. The infrastructure is simply not there yet to handle this. I mean, when California is telling people with electric vehicles to not charge their vehicles last summer, and I don't know what the percentage of electric vehicles is in California, it's probably 5%, if that. You can -- we all know that the infrastructure is not prepared to handle electric vehicles. So, we've chosen to make that -- it's an incrementally positive step to go to C&G. We'll be at 75% probably by the end of the year. And our goal is to ultimately get to 90%. If the technology -- the price point, by the way, is important to us. I'm not going to pay three times for an electric vehicle, what I pay for a CNG vehicle. If all of those things are worked out, look, we're all in for moving to EV. But we need to see some progress on -- particularly on the infrastructure. And right now, I don't know that we're seeing any progress on infrastructure. Kevin Chiang: Can I ask just a follow-up on that? Are your RNG or CNG trucks considered essentially net zero? Because effectively, you're in a unique position in that you also produce RNG as your landfill. But would a state like California look at your RNG fleet differently than, say, a typical owner operator running a Class A truck just because you're producing on the front end as well when you're creating a circular economy? Or is that still kind of an unknown now in terms of how they might treat that? John Morris: I think from a progression standpoint going from diesel to CNG, CNG-RNG, it's certainly going in the right direction. But I don't think that California, if it's a combustion engine. I'm not sure they would define it any other way, at least at this point in time. Jim Fish: It's a good point, though, because RNG is a renewable fuel. So, if you're using a renewable fuel to fuel a CNG truck, I don't think you have to be a mathematician to figure that out. It should be a net zero. But I don't think -- to John's point, I don't think they look at it that way today. . Kevin Chiang: Okay. Thanks for the color and best of luck to 2023 year. Operator: Thank you. Our next question comes from the line of Sean Eastman with KeyBanc. Your line is open. Sean Eastman: Hi team. I just wanted to confirm that all the guidance is intact, and in particular, including the collection and disposal yield, I think you guys have given us approaching 5.5% number. Just wanted to get that confirmation. Devina Rankin: So, yes, at this point, we're good with each element of the guidance. So, as Jim was saying earlier, specific to the commodity-based businesses, we have some caution around those. But when we look at the yield component, we actually see the revenue results including yield for Q1 being a little ahead of our plan. So, we're certainly confident in that aspect of the guidance that we provided. Sean Eastman: Okay, excellent. That's helpful. And then is there sort of a logical approach we can take to this combined recycling and renewable energy line that's now in the revenue build? I mean, I'm just kind of scratching my head a little bit on how to apply some science to the model there. Devina Rankin: Sure. What we intend to do there, at one point, we had moved our renewable energy business into the fuel line, and with some of the noise it was creating in the fuel line, we saw value in pulling that out. What we do is try and work ourselves towards providing better clarity about the key drivers of our business. And because renewable energy and recycling both have commodity-based impacts, we thought looking at those on a combined basis made some sense. And if you need additional color on that, Ed and Heather are sure to get you the details that you need. Sean Eastman: Okay, helpful. I'll turn it over. Thanks. Devina Rankin: Thank you, Sean. Operator: Thank you. Our next question comes from the line of Stephanie Moore with Jefferies. Your line is open. Stephanie Moore: Hi, good morning. Thank you for the question. Jim Fish: Good morning. Stephanie Moore: I wanted to touch on -- clearly, you have made pretty meaningful progress in SG&A reduction and just your focus on cost cutting. But maybe you could touch a little bit about if there's any change in your approach to acquisitions as you continue to kind of balance SG&A reduction as well as acquisitions. And has there been any change in terms of how you look at deals, the integration opportunity, level of automation or other savings that you can get and if that's kind of changed your M&A philosophy a bit as you take a bit more of a cost-focused approach here. Jim Fish: Yes, it's a good question because I wouldn't say that our approach has changed. We always are looking at what makes best sense for the shareholders. But I do think your point about being kind of an added synergy here is an important one. And we are factoring that in as we look at some of these companies. This is truly going to be a differentiator for us as we -- I talked about in my prepared remarks, I talked about the fact that we are taking cost out of our customer experience centers because we're using a self-service model now. And that was not insignificant. That is something that differentiates us from others who simply don't have that technology in place. So, it becomes a synergy for us as we acquire businesses. Stephanie Moore: No, that's helpful. And maybe taking that a step further. As you continue to look to do M&A as well as you move forward with cost-cutting investments. Is the opportunity for that maybe near-term dilutive impact from M&A in a given period of time to maybe diminish over time because of this? Or how are you thinking about that opportunity? Devina Rankin: So, I think what's important in giving color to the dilutive impact from the M&A that we saw in Q1, it really was twofold. One, in the solid waste business, we make investments in our facilities, the fleet, and our people right up front and that's the cost impact that you saw in the first quarter for the solid waste acquisitions. And then on the recycling part of the business, the Natura business is in early stages and we're making some investments there, too. And that cost about $6 million to the quarter just in terms of incremental spending that we did on the business. So, neither of those really were seeing the full benefit of leverage on the SG&A front -- I'm sorry, it wasn't that they weren't seeing the benefit of the leverage on the SG&A front, we were capturing and realizing that. It was more about investment in the operations and the long-term viability of each of those businesses. And we're making the progress that we expect to make so that they have incremental value creation for both the market in the solid waste business that we acquired, and then also thinking about the differentiated service model that we will now have in the recycling part of the business because this is a new line of business for us. Stephanie Moore: Understood. Very helpful. Thank you so much. Operator: Thank you. Our next question comes from the line of Tobey Sommer with Truist. Your line is open. Tobey Sommer: Thanks. With respect to driver retention and overall compensation in that area of your labor force, how do you expect that to trend, and particularly in the macroeconomic headwinds? And how much room for improvement could there be based on the historical ranges of those metrics in prior downturns? Thanks. John Morris: So, it's a good question. So, I think if you look kind of pre-pandemic through the pandemic, we went from obviously historic averages to historic lows, right, in terms of driver retention and turnover for obvious reasons. As we exited those numbers, went up past historic averages. And we've been working really earnestly the last two years not just on the wage front, but from an employee experience to get those numbers down. And I would tell you, we've made 400 to 500 basis points of improvement in a lot of those key frontline roles, and. You heard me in my prepared remarks talk about some of the peak wage inflation where it's moderated to now. So, that's clearly going in the right direction. But the biggest benefit really is when you can stabilize the workforce, those frontline folks. And we talked a lot about drivers, it's our biggest population. Your service gets better, your safety gets better and overtime ratios, training hours and all those things start to go the right way and we started to see signs of that in Q1. Tobey Sommer: Thanks. When you entertain conversations with smaller players in your M&A outreach, what are you hearing from them about the impact of higher rates and the kind of persistent required tech investments to stay competitive with the market? Jim Fish: I don't know that we're hearing a lot about tech because I'm just not -- I think they're more focused on how do they keep drivers on the road. We are hearing that, and some of the companies that we've acquired are showing double the turnover that we're showing. It's why we think there's an opportunity for us to take share -- continue to take share, first, because I think the customer service product that we are providing is superior. When you are able to hold a lot of your drivers, it makes a big difference in that customer lifetime value proposition. So, we are hearing that, that turnover has become a consistent and recurring problem for a lot of those companies. I think the other thing that I would like to mention too is as we think about drivers, why it's imperative that we bring technology to this labor pool. It's a shrinking labor pool. We've talked about it a lot. The Gen Z doesn't want to drive trucks the way a Baby Boomer or Gen X did. So, how do we take advantage of that and the way we take advantage of it is by bringing technology to squeeze 5%, 10% maybe even 15% optimization out. And that's exactly what we're doing in building an optimization tool that understands absolutely the best route to take. It understands things like location of carts. We finally now know where all of our assets are. It understands the expertise of drivers. I mean, there's a whole bunch of factors that go into a full optimization. And I guarantee there's not anybody else out there that's able to do that. It is not inexpensive to optimize that. But once we optimize it, then we become less reliant on labor. And it's a labor-intensive business, and we have 25% turnover in those driver ranks. How do I take advantage of that? And it's got to be through technology. Tobey Sommer: Thank you. Operator: Thank you. Our next question comes from the line of Tony Bancroft with Gabelli. Your line is open. Tony Bancroft: Thanks for the question. Actually a quick one. Would you review -- just quickly review sort of the impact that -- the potential impact from PFAS may or may not have on how the cost of landfills and sort of how -- I know there's going to be some rulings or some hearings coming out here over the next few months about it. But how do you see that playing out? And how do you see that impacting your business? Jim Fish: Yes. So, we've said that we think PFAS is more of an opportunity than a risk for us. It is kind of ubiquitous in these landfills and in the material that comes into them. It has been, at this point, EPA has designated PFAS as a hazardous material. And so I think they're going to have to understand the fact that hazardous sites are -- there are far fewer of them than there are non-haz sites. So, I think EPA is still trying to kind of work their way through PFAS. But it is worth saying that we view this as a big opportunity for us and for all landfill companies once they've kind of finally decided exactly how this is going to be handled. Tony Bancroft: Thanks so much Jim. Congratulations. Jim Fish: Thank you. Operator: Thank you. Our next question comes from the line of Noah Kaye with Oppenheimer. Your line is open. Noah Kaye: Good morning. First question, I guess, is how to think about fuel rolling over in terms of impact to EBITDA and margins over the rest of the year. You have such a high percentage of the fleet on natural gas versus peers. So, maybe it doesn't impact the cost line as much, but perhaps a surcharge line. If you can just give us some guidepost on how to be modeling that or how to be thinking about that, that would be helpful. Devina Rankin: Yes, it's a great question, Noah. So, in terms of the impact, I think when you look at 2022, and the IRD table that we do I think is the best data point for that, fuel was a really significant contributor. And we've already seen in Q1, our fuel surcharge revenue in Q1 versus Q4 of last year was less than half on a year -- or on a sequential basis. And so what we are seeing is that, that revenue decline should actually benefit the margin side of the business. We didn't really see any meaningful margin impact in the first quarter, but we do expect that we will see some margin impact over the remainder of the year. We're also taking some important steps that we think are beneficial in terms of looking at the overall cost structure of the organization that is dependent upon the fact that we are at 75% CNG for fleet and delivery. But when we look at our consumption, we don't just look at the collection line of business. We look at the heavy equipment at our landfills and all of that. So, we're looking at making sure that we're not just doing a diesel-based fuel surcharge, we're doing a blended surcharge. And some of those changes, our customers are going to begin to see in the second quarter. So, we're confident that we're going to maintain that true pass-through model that we've had over the last many, many years. It just will look a little bit different in future quarters, both because of the lapping of the really significant increases in diesel that we saw a year ago, but also because we're taking some structural changes with how we bill that to our customers. Noah Kaye: That's really interesting. And I mean, there's benefits here potentially to the customers as well because historically, I mean, I forget the last few years. But historically, CNG fuel prices have been more stable relatively. So, would that change just be received positively by customers as maybe a way to help reduce volatility to them on the cost side? Devina Rankin: We absolutely see that as something that our customers will receive well. And our customers already like the fact that, that CNG truck that's rolling down the street is quieter than the diesel vehicle. We see this as something else that the customers will receive as a positive from WM investing economically and environmentally beneficially in a differentiated fleet to service. Noah Kaye: Great. And then just on recycling, just trying to get some better gauges or indicators of demand. Maybe you can talk to your sense of the mills inventory position on recycled fiber. Maybe characterize the flow of impounds and inbound. I'm guessing kind of late 3Q, you probably didn't hear a lot of phones ringing in terms of requests for product. How is it trending now? John Morris: Yes, I think we benefited from -- we've talked a lot about our brokerage business being part of the recycling portfolio, and what that's always -- what that's added to us as a benefit is our ability to move the material. So, we don't have any issue moving the material we're bringing in. And even where we're growing volumes, we're still able to move that material. I think the interesting thing, Jim, I think, touched on this, is that there is some domestic capacity that's opening up here this year. And we've seen a little bit of positive movement here just late in the last handful of weeks on some of the fiber pricing. And Jim mentioned that overall, the whole basket of goods has moved up here a little bit as we exited Q4 into Q1 and then even exiting Q1 into Q2. Jim Fish: No, it also helps that China's open back up. And while we don't send a lot of stuff straight to China anymore, they do affect worldwide demand. And when China has closed down with their COVID policy, that hurt worldwide demand. Now, that they've chosen to reopen their economy, that is helping and that will help us out as well. Noah Kaye: Makes sense. Thank you. Operator: Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I will now like to turn the call back to Jim Fish, President and CEO for closing remarks. Jim Fish: All right. Thank you, Tawanda. I guess just to conclude here you've heard that we're on track for another solid year. We were right on plan for the first quarter. Looking forward to seeing a lot of you next week in New Orleans. Should be enjoyable. So, thanks for joining us this morning, and we'll see you next week. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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Waste Management, Inc. (NYSE:WM) - Market Performance and Future Outlook

Waste Management, Inc. (NYSE:WM) Maintains Market Perform Rating - A Closer Look

Waste Management, Inc. (NYSE:WM) is a leading provider of comprehensive waste management services in North America. The company offers collection, transfer, recycling, and disposal services. It competes with other waste management companies like Republic Services and Waste Connections. On October 30, 2024, BMO Capital maintained its "Market Perform" rating for WM, suggesting investors hold their positions. At that time, WM's stock price was around $216.55.

BMO Capital also raised WM's price target from $213 to $220, as highlighted by TheFly. This adjustment reflects confidence in WM's future performance. The company's recent Q3 2024 earnings call, held on October 29, 2024, showcased strong financial results. WM's earnings per share reached $1.96, surpassing the Zacks Consensus Estimate of $1.86. This is an improvement from the previous year's $1.63 per share.

WM's revenue growth across all segments indicates robust performance. The company's market capitalization is approximately $87.16 billion, reflecting its significant presence in the industry. Despite a slight decrease in stock price to $217.20, WM's performance remains strong. The stock has fluctuated between $216.31 and $218.86 during the trading day.

The Q3 2024 earnings call featured key company leaders, including CEO Jim Fish and CFO Devina Rankin. Analysts from major financial institutions like Morgan Stanley and Goldman Sachs participated, highlighting the importance of WM's financial performance. The company's strategic initiatives and strong earnings results contribute to the positive outlook reflected in the raised price target.

Waste Management, Inc. (NYSE:WM) Earnings Preview

  • Analysts expect Waste Management, Inc. (NYSE:WM) to report earnings per share of $1.86 and revenue of $5.51 billion for the third quarter.
  • The Collection segment is anticipated to generate $4.1 billion, marking a 17.3% year-over-year increase.
  • WM has a history of exceeding earnings expectations, with an average surprise of 7.5% over the last four quarters.

Waste Management, Inc. (NYSE:WM) is a leading provider of comprehensive waste management services in North America. The company offers collection, transfer, recycling, and disposal services. As a major player in the waste management industry, WM competes with companies like Republic Services and Waste Connections. The company is set to release its third-quarter earnings on October 28, 2024.

Analysts expect WM to report earnings per share of $1.86, with projected revenue of approximately $5.51 billion. This represents a 5.8% increase in revenue compared to the same quarter last year, as highlighted by Zacks. The growth is likely driven by WM's customer lifetime value model, which has contributed to organic revenue growth. The Collection segment is expected to generate $4.1 billion, marking a 17.3% year-over-year increase.

WM has a history of exceeding earnings expectations, having surpassed estimates in three of the last four quarters with an average surprise of 7.5%. Investors are keen to see if the company can continue this trend, as exceeding expectations could positively impact the stock price. Conversely, failing to meet estimates might lead to a decline in the stock's value.

The company's financial metrics provide insight into its valuation and performance. WM has a price-to-earnings (P/E) ratio of 32.62, indicating the price investors are willing to pay for each dollar of earnings. The price-to-sales ratio is 3.96, reflecting the market value compared to its revenue. Additionally, the enterprise value to sales ratio is 4.75, offering a perspective on the company's valuation relative to its sales.

WM's debt-to-equity ratio is 2.25, showing the proportion of debt used to finance its assets relative to shareholders' equity. The current ratio is 1.07, suggesting the company's ability to cover short-term liabilities with short-term assets. These metrics, along with the earnings yield of 3.07%, provide a comprehensive view of WM's financial health and investment potential.

Ed Cofrancesco's Analysis on Teradyne and Waste Management's Growth

Ed Cofrancesco's Insights on Teradyne (TER) and Waste Management (WM)

Ed Cofrancesco's insights into Teradyne (TER) and Waste Management (WM) highlight the potential for growth in companies that are leveraging advancements in technology and sustainability. Specifically, Waste Management's recent performance, as detailed in the Schwab Network's publication on April 29, 2024, showcases a company that is not only meeting but in many areas exceeding financial expectations. This performance is particularly noteworthy in the context of the broader market and the specific sectors in which WM operates.

Waste Management's first-quarter earnings for 2024 reveal a company on the rise, with adjusted earnings per share of $1.8 beating the Zacks Consensus Estimate by 15.1% and showing a significant year-over-year improvement of 33.6%. This outperformance is a clear indicator of the company's operational efficiency and its ability to grow earnings at a faster rate than many of its peers. Despite a slight miss in total revenues, which came in at $5.2 billion, the company's year-over-year revenue growth of 5.5% is a testament to its solid market position and the increasing demand for its services.

The detailed breakdown of Waste Management's quarterly performance further underscores the company's strengths across its various segments. The Collection segment, as the largest revenue contributor, saw a 4.5% increase to $4.1 billion, indicating robust demand for waste collection services. The Recycling segment, with a 16.6% jump in revenues to $436 million, highlights Waste Management's successful navigation of the recycling market's volatility and its ability to capitalize on higher commodity prices. These segment performances, coupled with a 14.6% increase in adjusted operating EBITDA to $1.5 billion and a significant margin expansion, reflect a company that is not only growing its top line but also improving its profitability.

Financial health is crucial for sustaining growth and returning value to shareholders, and Waste Management's financials show a company in a strong position. Despite a slight decrease in cash and cash equivalents, the company's long-term debt reduction and substantial free cash flow generation of $714 million demonstrate its operational efficiency and financial discipline. The return of $557 million to shareholders through dividends and share repurchases further illustrates Waste Management's commitment to shareholder value.

The stock's performance, with a 13.3% gain over the past three months, outpacing both the industry and the broader market, reflects investor confidence in Waste Management's growth trajectory and operational excellence. The company's adjusted outlook for 2024, with expected total revenue growth of between 5% and 5.75% and an adjusted operating EBITDA forecast of $6.375-$6.525 billion, signals continued optimism for its future performance. Waste Management's ability to adjust its projections positively in a challenging market environment speaks volumes about its resilience and strategic planning.

Waste Management Earns an Upgrade at Erste Group

Erste Group analysts upgraded Waste Management (NYSE:WM) from Hold to Buy, citing the company's growth strategy and successful integration of acquisitions.

The analysts' comments highlighted Waste Management's dual approach to growth, emphasizing both organic expansion and strategic acquisitions. A key example of their successful acquisition strategy is the integration of Advanced Disposal, a competitor, which has been effectively executed.

The analysts also pointed out Waste Management's potential to enhance its operating margin. This improvement is expected to be driven by stringent cost-control measures. Looking ahead, they forecast a significant increase in the company's financial performance. For 2024, sales are projected to grow by approximately 6% year-over-year, while earnings per share are expected to rise by about 13% compared to the previous year. These growth rates, as per Erste’s analysis, are set to surpass the figures achieved in 2023.

Waste Management Reports Worse Than Expected Q4 Results

Waste Management (NYSE:WM) reported its Q4 results last week, with EPS of $1.30 coming in worse than the Street estimate of $1.41. Revenue was $4.94 billion, missing the Street estimate of $4.97 billion.

Volumes and average yield were below target, but this was partially offset by lower operating expenses that drove margin expansion above estimates. This appears to be the same story for 2023 with the company providing an outlook where top-line volumes and yield were below expectations, but EBITDA guidance of $5.825 - $5.975 billion was roughly in line due to margin expansion.

The company provided an update to its strategy on renewable energy and recycling investments with 2023 to see the highest spend for these projects which will weigh on free cash flow. While these projects look to have high returns, investors may not appreciate the volatility of earnings that this could potentially bring to a predictable solid waste business and the valuation to ascribe to this is something to consider.

Waste Management Reports Q2 Beat, Shares Up 3%

Waste Management, Inc. (NYSE:WM) shares were up 3% on Thursday following the company’s reported Q2 results, with EPS of $1.41 coming in better than the consensus estimate of $1.40. Revenue was $5.03 billion, compared to the consensus estimate of $4.84 billion.

Analysts at Oppenheimer see healthy margin expansion in 2023 as increasingly probable, given stronger pricing and underlying CPI trends supporting 2023 price tailwinds, and management indicating internal cost inflation has peaked.

While management did not discount a recession scenario, the analysts believe the current forward volume indicators remain healthy. Contractual constraints are gating a portion of the company's planned automation/productivity investments, but ROI on those investments continues to improve.

The company expects full 2022-year revenue growth of over 10% year-over-year, compared to the prior estimate of 5.8-6.2%. Adjusted operating EBITDA is expected to be in the range of $5.5-$5.6 billion, representing an increase of $175 million from the prior guidance.

Waste Management Reports Mixed Q4 Results, Announces Ambitious Investment Plan

Waste Management, Inc. (NYSE:WM) reported its Q4 results, with adjusted EPS coming in at $1.26, in line with the consensus estimate, and revenue at $4.678 billion, above the consensus estimate of $4.619 billion.

The company expects a 2022 revenue growth of 5.8-6.2%, implying $19,007 million, compared to the consensus estimate of $19,062 million.

According to the analysts at Oppenheimer, the company delivered mixed results/guidance, while laying out an ambitious plan to invest $1.625 billion in recycling/RNG in 2022-2025. The analysts said that Automation has emerged as a vital lever to mitigate labor pressures alongside price, supporting improving margin trends in the back half.