By the numbers
Net income: $639M
Core price: 8.2%
Up from 4.6% in the third quarter of 2021
- Economic outlook: WM executives were optimistic about a 1.7% increase in collection and disposal volumes for the quarter, taking it as a sign of resilience amid recession fears. "1.7% at a time when everybody's speculating about when's the economy gonna turn down was really impressive to us,” said CEO Jim Fish during the company’s Wednesday earnings call, also noting special waste volumes were still up 15% as of last week.
- Pricing: The company said customer retention rates had largely been unaffected by price increases and previewed plans to do more in the future. “We’ve kind of been using price to combat this inflation issue over the last 12 months, so most of it’s really been cost recovery. I’d love to get to a point where price is not just cost recovery but also margin expansion,” said Fish.
- Labor: Turnover rates have moderated in some positions and Chief Financial Officer Devina Rankin said wage inflation is currently around 7%, down from 11% a year ago. Fish said the company is also on track to cut an estimated 1,000 high turnover positions, particularly in MRF and customer service roles, by the end of this year through attrition.
- Recycling: Revenue was $420 million for the quarter, down nearly 9.5% year over year due to a sharp decline in commodity prices. WM anticipates its blended average commodity rate will decline from $94 per ton to $50 per ton in the fourth quarter, but Chief Operating Officer John Morris said the shift to a processing fee-based model in recent years will provide “solid returns in any economic environment.”
- Capital costs: WM spent $547 million on capital expenditures in the quarter and anticipates hitting its full-year target as supply chain issues ease slightly. The company foresees 2023 as an outsized year for capital spending, as it ramps up plans to retrofit or build new MRFs and install renewable natural gas systems at landfills.
- RNG: WM’s plans for 17 new plants remains on track, with meaningful earnings contributions expected to hit around 2025 or 2026. Rankin said the company is pursuing a mix of short- and long-term offtake agreements. Fish said an estimated 100 landfills could be eligible for RNG projects.
- Looking ahead: WM still anticipates hitting its latest annual earnings guidance, despite inflationary costs and recycling commodity price declines. While the company’s internal inflation rate is still in the high single digits, executives said operating expenses are improving and they may have turned a corner. “We expect inflation probably starts to come back down, which then would imply that core price has peaked,” said Fish. “For most of 2022 it’s been kind of fighting this inflation battle with pricing.”
