By the numbers
Net income: $587M
Core price: +7.5%
Led by industrial and commercial pricing, WM’s efforts to offset inflationary pressures have reportedly gotten minimal pushback.
M&A outlook: $300M-$400M in spending
A typical year’s spend has been $100M-200M, but the company said during a Wednesday earnings call that it’s seeing the “strongest pipeline we’ve had in a long time.”
- Economic outlook: Based on results to date, WM is raising its annual guidance for multiple categories and said July volumes (particularly in special industrial waste, which can be an early indicator) don’t currently show signs of a potential economic slowdown. If a recession does occur, CEO Jim Fish said the company is “well-positioned for any business environment,” and he believes its recent pricing efforts will stick.
- Inflation: If inflation moderates, Fish said, that would help alleviate certain operating costs and allow positive trends from pricing and volume to further improve profit margins. Currently, according to Chief Operating Officer John Morris, “our core price is recovering our cost of inflation in each line of business, except for residential.”
- Capital spending: WM reported $485 million in this category for Q2, up from $387 million in the same quarter during 2021, but Chief Financial Officer Devina Rankin said the pace of spending had been slower than expected. The pace of truck deliveries remains slow, even after revising expectations downward earlier in the year, so spending in other categories will likely be accelerated.
- ESG spending: WM reported the completion of its fifth renewable natural gas project, located at a landfill in Oklahoma, which is the first of 17 newly planned projects that it expects to complete by 2026. It has also completed its sixth large-scale MRF overhaul, at a site in Houston, as part of its efforts to reduce labor costs and improve material values.
- M&A: While WM has been less engaged in acquisitions since its major Advanced Disposal Services purchase in 2021, and no acquisition spending was reported for the second quarter, Fish said the company’s leverage is back to prior levels and more transactions are anticipated. “We don’t want to bail somebody out of a problem, we’re still going to be conservative when it comes to valuations,” said Fish. “We think there’s some really good companies out there that are not asking for ridiculous purchase prices.”
- Looking ahead: WM said its efforts to automate high-turnover jobs, particularly on collection trucks and at MRFs, only look more financially attractive as time goes on and can help it further expand in the market. “Most other companies out there in our space just don’t have the technology or the wherewithal,” said Fish. “Even in a recessionary environment... we feel good about taking share in a tough operating climate.”
