Earnings Reaction · Q3 2026October 27, 2026 · reported after the close · call Wed Oct 28, 10:00 AM ET
WM (Waste Management)WM · NYSE
A quarter "in line with expectations" that missed the Street by three cents, with fuel and risk-management costs eating the price-cost spread. Guidance affirmed, cash flow at the high end — and a defensive at 23× has no cushion for a 10-basis-point margin compression.
Last
$231.00
−2.0% after hours (close $235.81) · 52-wk $194.11–$248.13
Fair value (prob.-wtd)
$238
+3% vs AH · base $240
Q3 actual
$6,846M / $2.15
Street $6,815M / $2.18 · adj. EPS +9% y/y
Adj. EBITDA
$2,121M · 31.0%
+5.8% y/y · margin −10 bp
FY26 guide
Affirmed
revenue + FCF at high end; EBITDA $8.15–8.25B in range
Core price / yield
5.8% / 3.4%
C&D volume −0.4% (−0.5% workday adj.)
Free cash flow
$985M
9M $3.01B, +42% y/y · 50% EBITDA conversion
Valuation
25.4× / 22.8×
FY26E $8.14 · FY27E $9.09 · 1.9% short
Earnings reaction — in line by their words, a miss by the Street's, −2% after hours. Revenue $6,846M (+6.3%) vs. $6,815M; adjusted EPS $2.15 vs. $2.18 (GAAP $2.05); adjusted operating EBITDA $2,121M, +5.8%, margin 31.0%, down 10 bp y/y. The bridge is the whole story: Collection & Disposal price-to-cost spread added 40 bp and Healthcare Solutions (Stericycle) added 30 bp, and fuel took 40 bp and risk-management costs 40 bp. Operating expenses rose to 59.8% of revenue from 58.9%. C&D volume fell 0.4% (intentional residential shedding plus national-account broker losses); energy surcharges and mandated fees were +42% and drove a third of the yield. Healthcare Solutions grew 3.7% with EBITDA up more than 30% to a 22.4% margin — the one clean positive. Cash is strong: $985M of Q3 FCF, $3.01B year-to-date (+42%), $957M returned in the quarter, $2B of buybacks still planned for the year. Guidance affirmed: revenue at the high end of $26.275–26.475B, EBITDA within $8.15–8.25B, FCF at the high end of $3.75–3.85B. Why −2%: at 23× forward with 1.9% short and 27% implied vol, the market was positioned for a quiet beat; a three-cent miss with margin compression from fuel at $103 oil is exactly the "decelerating slope on a defensive" the tape has punished, and EBITDA guidance that was not raised to the high end while revenue and FCF were says the margin is the soft spot.
What the quarter said
| Line | Q3 26 | Q3 25 | Y/Y | Read |
|---|
| Revenue ($M) | 6,846 | 6,443 | +6.3% | Core price 5.8%, yield 3.4%, surcharges +42% |
| Adj. op. EBITDA ($M) | 2,121 | 2,005 | +5.8% | Margin 31.0% vs 31.1% |
| C&D adj. EBITDA margin | 38.3% | 39.0% | −70 bp | Fuel + risk mgmt costs |
| Healthcare Solutions margin | 22.4% | 17.5% | +490 bp | Synergy capture; EBITDA +30%+ |
| Adj. EPS | $2.15 | $1.98 | +9% | Street $2.18 |
| Free cash flow ($M) | 985 | 821 | +20% | 9M FCF $3.01B, +42% |
| Capital return ($M) | 957 | — | — | $580M buyback + $377M dividends |
Volume is the quiet negative: commercial −1.3%, residential −2.6%, total collection −1.2% on a workday-adjusted basis. Management frames it as intentional shedding of low-margin residential and prior broker losses; it also means the 6.3% revenue growth is price, surcharge and acquisitions, with the underlying unit base shrinking. Recycled commodity prices helped ($82/ton vs. $68) and RIN prices hurt ($2.32 vs. $2.56).
The one metric that matters
Collection & Disposal EBITDA margin against the fuel line. C&D margin fell 70 bp to 38.3% with fuel and risk-management costs more than offsetting a healthy 40 bp of price-cost spread. With WTI at $103, Q4 carries the same headwind; the question for the call is whether surcharges catch up (they lag by a quarter) and whether the "risk management" cost — claims, insurance — is a one-quarter reset or a new run-rate. Secondary: Healthcare Solutions synergy cadence, which is now the growth engine.
Where it touches the threads
- Rates and the defensive multiple. A 23× compounder with 2% short is the archetype of the stock the tape has sold on small disappointments; a 10-year at 5.00% makes the dividend yield (1.4%) a worse argument.
- Energy as a cost input. Oil at $103 shows up here as a 40 bp margin hit and an energy surcharge that inflates revenue — the same oil tape that pays SLB and BKR takes from WM.
- Renewable natural gas / sustainability capex wound down to $55M in the quarter from $141M — the 18th RNG plant is done and the harvest phase is the FCF story.
Valuation and scenarios
At $231 after hours WM is ~$92B of market cap (400M shares) with $23.4B of debt; 25.4× FY26E ($8.14) and 22.8× FY27E ($9.09). Waste has earned a premium multiple on pricing power and FCF conversion; both held this quarter, the margin did not. Fair values are independent house estimates on FY27 earnings power and a 22–29× range that brackets the stock's five-year history.
Bull25% probability
$270+17%
- Fuel surcharges catch up; C&D margin recovers to 39%
- Healthcare Solutions synergies run ahead; FY27 EBITDA guide above Street
- FY27 EPS ~$9.3 × 29× — premium multiple restored
Base50% probability
$240+4%
- FY26 delivered at the ranges; FY27 EPS ~$9.1
- Margin flat; volume still slightly negative
- 26.5× — the stock holds its multiple and grows into it
Bear25% probability
$200-13%
- Fuel and claims costs persist; margin compresses another 50 bp
- Volume shedding reads as share loss; EBITDA guide trimmed
- FY27 EPS ~$9.0 × 22× — de-rate toward the 52-wk low
Probability-weighted fair value
$238
vs. after-hours $231.00
+3%
Fairly priced for a quarter that was fine but not clean. The multiple, not the earnings, is what moves this stock from here.
What to watch
- Q4 margin commentary and the fuel-surcharge lag
- Risk-management cost — one quarter or run-rate
- FY27 preliminary framework on the 10 AM ET call
- Healthcare Solutions synergy total and margin target
- Volume — when shedding stops and the base grows
- Buyback: $1.58B done of $2B
The desk read: nothing here is broken, which is exactly why a defensive can drift — the bull case needs a margin inflection that fuel at $103 is delaying. Levels: $225 then $215 below; $236 (close) and $248 (the high) above.
Sources
- WM Q3 2026 results, 8-K Exhibit 99.1 — https://www.sec.gov/Archives/edgar/data/823768/000110465926119188/tm2628322d1_ex99-1.htm
- Filing index — https://www.sec.gov/Archives/edgar/data/823768/000110465926119188/
- Pre-print consensus: Briefing/Schwab workbook. Prices and after-hours quotes: Schwab market data, Oct 27, 2026 ~4:15 PM CT.
For educational/entertainment purposes. Sikuli Research publishes independent opinions; nothing here is investment advice, a research report under FINRA rules, or a solicitation to buy or sell any security. Fair-value scenarios are the author's assumptions and may change without notice. Prices are as of the time stated and should be confirmed against a live feed. The author may hold positions, long or short, in securities mentioned.