On Wednesday, Scotiabank adjusted its stock price target for Waste Management (NYSE:WM), increasing it to $225 from the previous $220, while keeping a Sector Perform rating on the stock. The change follows Waste Management's announcement of a third-quarter earnings beat and an uplift in its 2024 guidance.
Waste Management has experienced higher-than-anticipated revenue growth, driven by robust solid waste performance and sustainability project initiatives. The company has also achieved record margins, benefiting from effective cost management and improved employee turnover rates. The ongoing mergers and acquisitions are contributing positively as well.
The management team at Waste Management anticipates a stronger performance in 2025, supported by organic growth, strategic acquisitions, and sustainability efforts.
With these factors in mind, Scotiabank has updated its projections, now forecasting compound annual growth rates (CAGRs) of 6% for organic revenue, 9% for EBITDA, and a significant 34% for free cash flow (after total capital expenditures) for the years 2025-2026. These forecasts exclude the impact of the impending Stericycle acquisition, which is expected to close in the fourth quarter of this year.
The analyst's maintained Sector Perform rating reflects a balanced view of the stock, taking into account both the growth prospects and the potential challenges ahead. While the outlook is somewhat improved, there are concerns regarding the integration of Stericycle and the high leverage ratio that Waste Management is likely to carry until 2026. These factors represent execution risks that could affect the company's performance going forward.
In other recent news, Waste Management has been making significant strides with its third-quarter earnings surpassing consensus estimates, leading Jefferies to raise its target to $255. The company's solid performance has been attributed to increased volume, effective cost programs, and contributions from mergers and acquisitions.
Truist Securities also adjusted its outlook on Waste Management, increasing the stock's price target to $250, following robust performance in its core Solid Waste business.
Waste Management's merger with Stericycle Inc (NASDAQ:SRCL). is progressing, with approvals from antitrust authorities in the United States, Portugal, and the UK, despite regulatory scrutiny from the Competition Bureau of Canada. The merger is expected to complete in the fourth quarter of 2024.
BofA Securities has adjusted its outlook on Waste Management, increasing the price target to $225 from $220, anticipating a significant increase in earnings for the year 2025. Baird also updated its outlook on shares of Waste Management, increasing the price target to $230, reflecting recent market trends and pricing changes that could impact the company's operations.
These recent developments highlight Waste Management's strategic investments, financial health, and potential for future growth.
InvestingPro Insights
Waste Management's strong performance, as highlighted in the article, is further supported by real-time data from InvestingPro. The company's revenue growth of 6.17% over the last twelve months and a quarterly growth of 7.91% in Q3 2024 align with Scotiabank's positive outlook. Additionally, Waste Management's EBITDA growth of 12.12% in the same period underscores its operational efficiency and cost management efforts.
InvestingPro Tips reveal that Waste Management has raised its dividend for 20 consecutive years, demonstrating a commitment to shareholder returns. This is particularly noteworthy given the company's robust financial health, with a dividend yield of 1.37% and a dividend growth rate of 7.14% over the last twelve months.
The stock's performance has been impressive, with a year-to-date total return of 23.68% and a one-year total return of 36.67%. This aligns with the InvestingPro Tip indicating that the stock is trading near its 52-week high, currently at 97.38% of that level.
While Scotiabank maintains a Sector Perform rating, investors should note that Waste Management is trading at a high P/E ratio of 30.47 (adjusted for the last twelve months as of Q3 2024). This valuation metric, combined with the InvestingPro Tip suggesting the stock is trading at a high earnings multiple, may warrant careful consideration for potential investors.
For a more comprehensive analysis, InvestingPro offers 14 additional tips for Waste Management, providing deeper insights into the company's financial health and market position.
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