Waste Management (WM) Q2 FY26 earnings call: guidance and Q&A

What are the volume and price trends in the Healthcare Solutions business, and how should we think about its future growth?

Management stated that WMHS is now integrated, showing strong EBITDA, pricing, and SG&A performance. DSO is dropping, customer credits are decreasing, and cross-selling is picking up, contributing $32 million in annual operating EBITDA to date. SG&A as a percentage of revenue has significantly improved from 24-25% at acquisition to 18% in Q2, with a target of 15-16% by year-end. They are optimistic about long-term growth due to demographics and healthcare expenses.

“overall, the WMHS story is a good one. It was one of the drivers of our strong EBITDA pricing, SG&A performance for Q2. So we were pleased with that. I think we can finally say the business is integrated.”

asked by Toni Kaplan · answered by James Fish

Can you clarify the components of the narrowed revenue guidance, specifically the impact of energy surcharges, lower solid waste volumes, recycling brokerage, and RNG?

Management explained that the $250 million lower revenue is primarily from collection and disposal volumes, partially offset by $175 million higher energy surcharges, resulting in a net $75 million impact. An additional $75 million reduction is from sustainability businesses, split between lower recycling brokerage (minimal EBITDA impact) and delayed RNG plant connections. The company is mitigating earnings impact through pricing and cost management.

“The $250 million is really just in the collection and disposal business on volume impact to lower revenue. The $175 million for higher energy surcharges, which equates to about a 20 basis point margin headwind really is kind of carrying us through Q3 and then we start to see some decel or normalization of diesel prices and other prices that go into the calculation of the energy surcharge.”

asked by Noah Kaye · answered by David Reed

Has customer sentiment or macro volume trends changed over the last 90 days, particularly with commodity price volatility?

Management has not observed a significant change in macro sentiment. Key indicators like roll-off and special waste volumes (up 4.5% ex-wildfire, industrial up 50 bps in last 4 weeks) suggest the economy is stable, not declining. Volume negativity was mainly in the commercial line of business due to lost national accounts, not related to fuel surcharges or broader economic weakness.

“I mean we don't see a hugely growing economy, but we also don't see any any red flags. So that was about half of the revenue piece for the quarter.”

asked by Kevin Chiang · answered by James Fish

Given strong H1 free cash flow, why is full-year guidance maintained? Also, how much of the recycling volume growth is from new facilities versus existing, and what's the commodity market outlook?

Management is pleased with H1 FCF performance and confident in full-year guidance, which implies 29% YoY growth. Working capital, particularly accounts payable, is being monitored as a potential variable. In recycling, 38 of 39 planned facilities are online, contributing to 12% YoY volume growth, driven by new facilities and improved throughput at automated sites. Full-year commodity price outlook is slightly higher than $70/ton, but potential operating issues from a fire could offset this.

“We're very pleased with the performance of our recycling facilities. And at this point, we out 38 of our 39 that we originally had in our capital plan. Our last one will come online in 2027. And it really is coming from all angles.”

asked by Trevor Romeo · answered by Tara Hemmer

What are your views on residential volume trends, and is competitive intensity increasing in this segment?

Residential volume losses have moderated, improving 200 basis points sequentially to -2.9%. Management attributes this to selective top-line choices and modernization of the business model, which has more than doubled EBITDA margins in the last four years. They anticipate a pathway to flat to positive growth in residential volumes by mid-to-end of 2027, making it a potential growth opportunity.

“I think 2 things are happening. You're starting to see the front end of that moderation, obviously, the 200-plus basis points in defection improvement. More importantly, though, is I think when you look at the performance of that business, not just because what we've done about being selective on the top line of what we would take and the contract improvements, et cetera, but what we've done in the middle of the P&L there to make that a much more competitive cost model we've more than doubled the EBITDA margins in the last 4 years in that business.”

asked by Jerry Revich · answered by John Morris