Waste management services provider Waste Management (NYSE:WM) announced better-than-expected revenue in Q4 CY2024, with sales up 13% year on year to $5.89 billion. Its non-GAAP profit of $1.70 per share was 5.7% below analysts’ consensus estimates.
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Waste Management (WM) Q4 CY2024 Highlights:
- Revenue: $5.89 billion vs analyst estimates of $5.84 billion (13% year-on-year growth, 0.9% beat)
- Adjusted EPS: $1.70 vs analyst expectations of $1.80 (5.7% miss)
- Adjusted EBITDA: $1.71 billion vs analyst estimates of $1.71 billion (28.9% margin, in line)
- Revenue guidance for the upcoming financial year 2025 is $26.68 billion at the midpoint, in line with analyst estimates of $26.29 billion
- EBITDA guidance for the upcoming financial year 2025 is $7.55 billion at the midpoint, slightly above analyst estimates of $7.52 billion
- Operating Margin: 15.6%, in line with the same quarter last year
- Free Cash Flow Margin: 7.7%, up from 6.7% in the same quarter last year
- Market Capitalization: $84.11 billion
“The WM team achieved another year of exceptional results by continuously improving our core business, expanding our sustainability platforms, and adding medical waste and secure information destruction solutions for our customers,” said Jim Fish, WM’s President and CEO.
Company Overview
Headquartered in Houston, Waste Management (NYSE:WM) is a provider of comprehensive waste management services in North America.
Waste Management
Waste management companies can possess licenses permitting them to handle hazardous materials. Furthermore, many services are performed through contracts and statutorily mandated, non-discretionary, or recurring, leading to more predictable revenue streams. However, regulation can be a headwind, rendering existing services obsolete or forcing companies to invest precious capital to comply with new, more environmentally-friendly rules. Lastly, waste management companies are at the whim of economic cycles. Interest rates, for example, can greatly impact industrial production or commercial projects that create waste and byproducts.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Waste Management’s sales grew at a mediocre 7.4% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a rough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Waste Management’s recent history shows its demand slowed as its annualized revenue growth of 5.8% over the last two years is below its five-year trend. 
This quarter, Waste Management reported year-on-year revenue growth of 13%, and its $5.89 billion of revenue exceeded Wall Street’s estimates by 0.9%.
Looking ahead, sell-side analysts expect revenue to grow 16.2% over the next 12 months, an improvement versus the last two years. This projection is eye-popping for a company of its scale and implies its newer products and services will fuel better top-line performance.
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Operating Margin
Waste Management has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 17.2%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Analyzing the trend in its profitability, Waste Management’s operating margin rose by 2.4 percentage points over the last five years, showing its efficiency has improved.
This quarter, Waste Management generated an operating profit margin of 15.6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Waste Management’s EPS grew at a solid 10.4% compounded annual growth rate over the last five years, higher than its 7.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
We can take a deeper look into Waste Management’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Waste Management’s operating margin was flat this quarter but expanded by 2.4 percentage points over the last five years. On top of that, its share count shrank by 5.6%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. 
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Waste Management, its two-year annual EPS growth of 13.6% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q4, Waste Management reported EPS at $1.70, down from $1.74 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Waste Management’s full-year EPS of $7.22 to grow 10.3%.
Key Takeaways from Waste Management’s Q4 Results
We were comforted by Waste Management’s full-year EBITDA guidance, which slightly exceeded analysts’ expectations despite in line full-year revenue guidance. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its EPS in the quarter missed. Zooming out, we think this was a decent quarter featuring some important areas of upside. The stock traded up 1.1% to $212 immediately after reporting.
Is Waste Management an attractive investment opportunity right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
