Pricing, Network Scale & Acquisitions Aid WM Amid Debt Concerns
WM’s WM integrated network, disciplined pricing, technology investments and tuck-in acquisitions support steady revenue growth and margin expansion. Strong free cash flow also provides capacity for shareholder returns and continued investment.
However, elevated debt and relatively tight short-term liquidity constrain financial flexibility, particularly if cash generation weakens or investment requirements increase.
How Is WM Faring?
Integrated Network & Tuck-In Acquisitions Support Growth: WM’s collection, recycling, disposal and renewable energy network support recurring revenues and deeper value capture across the waste stream. Revenues rose 4% year over year to $6.68 billion in the second quarter of 2026, while management expects 2026 revenues of $26.275 billion-$26.475 billion. The company also completed $235 million of solid waste tuck-in acquisitions during the quarter, increasing route density, expanding its customer base and strengthening the value of its disposal network.
Waste Management, Inc. Revenue (TTM)
Waste Management, Inc. revenue-ttm | Waste Management, Inc. Quote
Pricing & Technology Drive Margin Expansion: WM’s pricing discipline, technology investments and cost controls are supporting profitability despite uneven volumes. In the second quarter of 2026, core price was 5.7%, while adjusted operating EBITDA margin expanded 40 basis points to 30.9%. Collection operating costs rose less than 1.7% despite about 4% labor cost inflation. Smart Truck contributes more than $300 million of annual run-rate EBITDA through service upgrades, route optimization and lower costs. During the second quarter, management raised 2026 adjusted operating EBITDA margin guidance by 20 basis points to 31-31.2%.
Strong Free Cash Flow Supports Capital Returns: WM continues to balance shareholder returns with investment in integration, technology and sustainability initiatives. Free cash flow rose 34.5% year over year to $1.10 billion in the second quarter of 2026 and exceeded $2 billion in the first half. The company returned $1.04 billion to its shareholders during the quarter through $659 million of share repurchases and $379 million of dividends. Management expects 2026 free cash flow of $3.75-$3.85 billion. This should support continued capital returns and strategic investment.
Elevated Debt Limits Financial Flexibility: Stericycle and ongoing investment have left WM with a sizable debt burden. As of June 30, 2026, the company had $1.08 billion of current debt and $22.28 billion of long-term debt, versus $557 million of cash and equivalents. Net interest expense reached $458 million in the first half of 2026. Leverage ended the second quarter at 2.96 times, within management’s 2.5-3.0 times target range, and is expected to decline in the second half. Even so, the high absolute debt balance could constrain flexibility if earnings or cash flow weaken while acquisitions and capital spending continue.
Tight Liquidity Limits Near-Term Flexibility: WM’s short-term liquidity remains constrained relative to near-term obligations. As of June 30, 2026, current assets of $5.40 billion trailed current liabilities of $5.95 billion, while the current ratio stood at 0.91 versus the Zacks industry average of 1.02. Cash and equivalents increased to $557 million but remained below current debt of $1.08 billion. Although first-half operating cash flow rose to $3.23 billion and management maintained 2026 free cash flow guidance of $3.75-$3.85 billion, debt service, capital returns and investment needs leave less flexibility if cash generation weakens.
Recent Financial Performance: WM reported second-quarter 2026 results with adjusted earnings of $2.02 per share, beating the Zacks Consensus Estimate by 1.5% and increasing 5.2% from the year-ago quarter. Revenues of $6.68 billion missed the consensus mark of $6.71 billion by 0.4% but rose 4% year over year.
WM’s Zacks Rank & Stocks to Consider
WM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A couple of better-ranked stocks in the broader Business Services sector are Coherent Corp. COHR and CBIZ, Inc. CBZ.
Coherent carries a Zacks Rank #2 (Buy) at present. It has a long-term earnings growth expectation of 52.5%.
COHR beat earnings estimates in three of the trailing four quarters and matched once, delivering an earnings surprise of 6.2%, on average.
CBIZ currently holds a Zacks Rank of 2. It has a long-term earnings growth expectation of 10%.
CBZ beat earnings estimates in three of the last four quarters and missed once, with an average earnings surprise of 8.9%.
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This article originally published on Zacks Investment Research (zacks.com).
