Shares in Waste Management Inc. were up almost five per cent in midday trading on Tuesday after the company reported third quarter results on Monday, which were strong across the board, according to an analyst at Stifel.
“It was a really strong quarter. They came (in) ahead of expectations across revenue, EBITDA (and) free cash flow,” Brian Butler told BNN Bloomberg in a Tuesday morning interview.
“Pricing remains strong; you had positive volumes, which combined really put some upward momentum in margins which were up about 90 basis points year-over-year in the third quarter… and then they raised guidance, so that was incremental upside from there.”
The Texas-based North American waste management service provider posted quarterly earnings of US$1.96 per share, beating estimates, while revenue came in at $5.61 billion, up nearly eight per cent compared to the same quarter last year.
The company also said it expects full-year revenue growth to hit six per cent, above the high-end estimate of 5.75 per cent previously released by the firm.
Butler, who maintains a buy rating on the stock, said the company’s share price has significant upside heading into 2025, noting that the company is still in the process of closing a multi-billion-dollar deal to acquire medical waste business Stericycle.
“That’s the pending deal that they announced back in June… you get that deal completed and then you combine that with some of the spending they’ve had on sustainability and renewable natural gas, and I think that makes for a very strong 2025,” he said.
“I think when we look at that all combined, it’s what will get Waste Management (stock) moving again.”
Butler said he remains bullish on the entire waste disposal sector in North America, noting that the industry has “a lot of pricing power.”
“And that’s not necessarily super new, but when you look at the ability to increase prices above their underlying inflation, they’re going to get sustainable margin growth from that piece alone,” he said.
“There’s a lot of incremental pieces that drive some positive momentum going into not only the fourth quarter but into 2025 as well.”