WM cites disposal, recycling for strong earnings

WM has reported a net income of $760 million in the third quarter of 2024, representing a 14.6 percent increase from $663 million net income in last year’s third quarter.

Year to date, the Houston-based waste and recycling company has earned a net income of $2.15 billion, marking an 18.6 percent increase compared with the $1.81 billion earned in the first nine months of 2023.

“Our investments in technology, our fleet and our asset network, combined with our disciplined pricing programs, are expanding the spread between price growth and our cost to serve,” WM President and CEO Jim Fish says.

Fish says the most recent results include a record operating margin of 30.5 percent for the quarter.

“Our strong results have been led by our collection and disposal business, where our focused efforts on frontline retention, optimization of our cost structure and providing differentiated service to our customers have fueled earnings growth," he continues.

"We continue to make headway on our sustainability growth investments and planning for the successful integration of the Stericycle business. We have a lot of momentum for a strong finish to the year, which will position us to deliver another year of outsized growth in 2025.”

WM's revenue companywide grew by 7.9 percent this summer compared with last, driven by core price growth of 6.5 percent. (A core price attempts to measure an average price charged for a unit of service.)

“In addition to strong execution on pricing, revenue grew above expectations due to higher market prices for the recyclable commodities we sell and a notable increase in landfill volumes," WM says.

In comments accompanying its third-quarter results, WM says it continues to prioritize technology and automation to optimize its cost structure and enhance operational efficiency.

"This is evident in operating expenses as a percentage of revenue improving 70 basis points to 60.6 percent in the third quarter,” WM says, adding this is the fourth consecutive quarter this measure has been below 61 percent.

WM also completed eight recycling projects in the third quarter and has now completed 24 out of its 39 planned automation and new market projects, most of them involving material recovery facility (MRF) investments.

“Completed projects have added 1.5 million tons of annual recycling capacity across North America,” the firm says. In an Oct. 29 earnings conference call, Fish specifically mentioned new MRFs in Florida and New York.

“Our automated recycling facilities are consistently delivering lower labor costs per ton and higher blended value on our commodity sales compared to our legacy plants, which translates into better operating earnings before interest, taxes, depreciation and amortization [EBITDA] margins,” he said.

In the conference call, WM Chief Sustainability Officer Tara Hemmer said the investments in MRFs are beginning to pay off not only because of increased volume but also because of increased quality.

“We’re seeing [a] roughly 17 percent higher blended value on the commodities we sell; we’re creating a cleaner product,” Hemmer said. “This is really important if you think about the commodity prices that we’re at today, and we’re expecting to end the year around $90 a ton. Our investment thesis was $125. So, getting a higher blended value on our commodities is very important, and that’s been proven out.”

On the same call WM Chief Financial Officer Devina A. Rankin expressed confidence in the WM strategy to make significant investments in its MRFs.

"When we look at the thing that made us so confident in this investment strategy, it really was the payback period of the recycling investments relative to investments we make in our traditional collection and disposal assets,” she said. “We’ve always talked about the recycling investments being one of the best return on invested capitals that we have across our portfolio, and we are seeing that not just hold, but accelerate."

The company has brought three of its 20 planned renewable natural gas (RNG) projects into service and expects four additional projects to be commissioned by year-end.

Growth by acquisition also remains a WM strategy, with the firm investing $790 million on acquisitions in 2024, largely for solid waste businesses. The acquired businesses have contributed $108 million of revenue growth in 2024, according to WM.

Additionally, the company continues to work through regulatory approval processes to support its planned acquisition of Stericycle, with that acquisition expected to close in the fourth quarter of 2024. WM says integration planning processes are moving forward as expected.

“We came into this year expecting strong execution across several fronts, and through the first nine months we have delivered results that exceeded our own high expectations," Fish says. "As we look ahead to 2025, we anticipate continued growth in our solid waste business, increased contributions from our sustainability growth investments, and the successful integration of the Stericycle business to come together to create a significant step change in revenue, earnings and free cash flow.”