Waste Management (WM) Q3 2026 Earnings Call: Q&A Summary

Q: Tyler Brown of Raymond James asked for color on Q4 EBITDA shaping and margin expectations.

A: David Reed, Executive Vice President and Chief Operating Officer, stated that Q4 should be consistent with year-to-date performance, noting that while margins typically improve sequentially, year-over-year comparisons might be lower due to fuel headwinds.

Q: Noah Kaye of Oppenheimer asked for clarification on whether the company expects EBITDA margins to be up sequentially but down year-over-year, and if that implies results toward the lower end of the guidance range.

A: David Reed clarified that the guidance range remains intact, noting that factors like volume, pricing, and recycling commodity prices could push results toward the higher end of the range.

Q: Tyler Brown of Raymond James asked for details regarding the risk-related headwind mentioned in the prepared remarks.

A: John Morris, President, and David Reed explained that the $63 million year-over-year increase was not related to safety performance but rather a third-quarter actuarial adjustment, large loss claims, and a difficult comparison against a prior-year insurance recovery.

Q: Tyler Brown of Raymond James asked about the breakdown of Healthcare revenue growth versus core price and volume.

A: John Morris noted that core price is at 5.5%, SG&A is at 15.2% of revenue, and EBITDA grew over 30%, adding that volume trends are improving.

Q: Tami Zakaria of JP Morgan asked if the company expects to exit the year with mid-single-digit growth in Healthcare.

A: John Morris stated that the company is focused on continuing to improve the middle of the P&L and will not take its foot off the gas regarding pricing and SG&A management.

Q: Seth Weber of BNP Paribas asked for an update on the cross-selling EBITDA contribution for Healthcare.

A: John Morris confirmed the $38 million figure from the previous year and expressed confidence in the business moving into 2027.

Q: Sabahat Khan of RBC Capital Markets asked about the pipeline and revenue outlook for the Healthcare business.

A: John Morris noted that trends are improving and while he is not ready to call for positive volume yet, the trajectory is positive.

Q: Kevin Chiang of CIBC asked if customer churn is increasing as the company pushes through pricing in Healthcare.

A: John Morris explained that churn is bifurcated between legacy issues and near-term trends, noting that the hospital segment is showing secular growth.

Q: James Schumm of TD Cowen asked for the updated SG&A goal for the Healthcare business.

A: John Morris and David Reed stated that the goal is to improve beyond the current 15.2% level, noting that there is still room for further optimization.

Q: Shlomo Rosenbaum of Stifel asked for insight into the drivers of EBITDA and SG&A improvement in Healthcare.

A: John Morris attributed the improvement to pricing commensurate with the cost to serve, accurate billing, and the automation of manual processes.

Q: Jerry Revich of Wells Fargo asked about the pricing strategy for 2027 given cost variability.

A: Tara Hemmer, Executive Vice President and Chief Operating Officer, stated the company is focusing on landfill and transfer station pricing to offset increased operating costs.

Q: Jerry Revich of Wells Fargo asked about RNG development plans and earnings expectations for 2027.

A: Tara Hemmer noted that 18 plants are online, and the company expects increased EBITDA from plants coming online in 2026 and 2027, while remaining confident in the $26 long-term price target.

Q: William Grippin of Barclays asked why RNG EBITDA margins were weaker sequentially.

A: Tara Hemmer explained the drop was driven by higher volume sold in the voluntary market at lower prices and the impact of start-up costs.

Q: Toni Kaplan of Morgan Stanley asked for an update on volume trends in the core business and residential shedding.

A: John Morris stated that residential volume is tracking toward positive, industrial roll-off is flat to slightly positive, and commercial is down 1.3% due to national account broker decisions.

Q: Tami Zakaria of JP Morgan asked for the reasons behind the volume outlook falling short of expectations.

A: John Morris cited intentional residential shedding and softness in landfill volumes and commercial business formation as the primary drivers.

Q: Sabahat Khan of RBC Capital Markets asked for a breakdown of volume details and potential green shoots.

A: John Morris and Tara Hemmer noted that industrial roll-off volume is holding up and special waste pipelines are strong, though they have not yet hit the P&L.

Q: Toni Kaplan of Morgan Stanley asked about the benefits of technology investments.

A: Tara Hemmer and John Morris highlighted the use of smart trucks, routing algorithms, and AI to lower costs, as well as the implementation of robotics in processing plants.

Q: Stephanie Moore of Jefferies asked about the internalization rate and labor productivity.

A: Tara Hemmer explained that internalization is driven by recycling volumes and routing, and the company is using technology like remote heavy equipment to reduce labor dependence.

Q: Faiza Alwy of Deutsche Bank asked about strategic focus and M&A priorities for the new CEO.

A: John Morris stated the focus remains on core solid waste tuck-ins and integrating Healthcare, with no major shifts in strategy.

Q: Konark Gupta of Scotia Capital asked if the company would be interested in potential asset spin-offs from larger players.

A: John Morris confirmed interest in solid waste core assets, noting the balance sheet is in great shape to pursue such deals.

Q: Trevor Romero of William Blair asked for details on recent M&A and the impact of interest rates.

A: Tara Hemmer and David Reed noted the focus is on core solid waste deals, and higher interest rates might make smaller operators more prone to exiting.

Q: Konark Gupta of Scotia Capital asked if the company is in a higher-for-longer pricing and weaker-for-longer volume environment.

A: John Morris noted that the company has historically been able to price through inflation and is finding ways to recover fuel costs across the portfolio.

Q: Kevin Chiang of CIBC asked about the regulatory environment and PFAS.

A: John Morris and Tara Hemmer stated that PFAS is a potential cost headwind that can be passed to customers, and the company is monitoring regulatory developments closely.

Q: Shlomo Rosenbaum of Stifel asked about diesel price assumptions and general inflationary impacts.

A: David Reed and Tara Hemmer noted an assumption of a 40% increase in diesel over Q4 of last year, adding that the fuel surcharge program has a 1-month lag.