WM (WM) Q3 2026 earnings review
WM's medical waste unit grows again, but trash volumes fall
WM, North America's largest trash hauler and recycler, returned its medical waste unit to sales growth while core trash volumes kept shrinking. Total revenue rose 6% from a year ago, as price increases, fuel surcharges, and new recycling and renewable gas plants offset a 0.5% drop in collection and disposal volumes. Chief executive Jim Fish steered full-year sales and free cash flow toward the top of the company's targets, and nine-month free cash flow jumped 42% as construction spending wound down.
| Internal revenue growth | +5.9% total revenue +6.3% to $6,846M |
|---|---|
| Operating Ebitda, excluding one-offs | $2,121M +5.8% from a year ago (31.0% margin) |
| Healthcare Solutions revenue | $651M +3.7% from a year ago; segment Ebitda +33% |
| Full-year revenue & FCF outlook | High end of $26.275–26.475B and $3.75–3.85B ranges |
⚖️ Verdict: 🟢 Bullish
The story got better because the acquired Healthcare Solutions business grew revenue by 4% after shrinking in the first half, proving the turnaround is no longer just about cutting costs. Lower overhead lifted the medical waste division's profit margin to 22%, up five percentage points from a year ago. One caution: fuel and insurance costs took nearly a full percentage point off the company's operating margin, and commercial trash volumes fell again on prior national account losses.
The question now is whether the medical waste and sustainability divisions are big enough to carry the company when core trash volumes lag and fuel costs bite. One camp sees a genuine growth engine now making up 14% of company profit, while skeptics see a rounding error if commercial customers keep leaving over price. Fourth-quarter commercial volumes and the 33% operating margin implied by our math for the final quarter will settle the debate.
🐂 Bull Case
Medical Waste Sales Grew Again and Lifted Profit
Healthcare Solutions is the medical waste and document shredding business WM bought when it acquired Stericycle. After shrinking in the first half of the year, the division's net sales grew 3.7% from a year ago to $651 million. Chief executive Jim Fish credited "effective cost management, synergy capture, and pricing growth" for pushing the unit's operating profit before depreciation up by more than 30%.
- Healthcare Solutions operating Ebitda, excluding one-offs: $146 million, up 32.7% from a year ago
- Healthcare Solutions operating Ebitda margin, excluding one-offs: 22.4%, up from 19.0% last quarter and 17.5% a year ago
- Company selling, general and administrative expenses, excluding one-offs: 9.3% of revenue, down 0.7 percentage points from a year ago
This matters because the medical waste turnaround no longer relies on cost cuts alone. Rising revenue combined with lower overhead lifted the combined share of company operating Ebitda from Healthcare Solutions, recycling, and renewable energy to 14.2% by our math, up from 11.1% a year ago.
What to watch: fourth-quarter overhead costs inside Healthcare Solutions. A drop to between 15% and 16% of segment revenue by year-end would show the integration stays on track toward the $300 million savings target for 2027.
Winding Down Plant Spending Lifted Free Cash Flow
Over the past four years, the waste hauler spent heavily to build automated recycling facilities and landfill gas plants. As that construction programme winds down, WM is keeping much more of the cash its operations bring in, which it describes as "harvesting the benefits of its investments". Free cash flow rose 20.0% from a year ago to $985 million in the third quarter, and surged 42.3% to $3.01 billion over the first nine months.
Capital spending on sustainability growth projects dropped to $55 million in the quarter from $141 million a year earlier, while routine equipment and landfill spending fell 5.2% to $602 million. That allowed the group to return $957 million to shareholders in the quarter through $580 million of share buybacks and $377 million of dividends, while guiding full-year free cash flow to the top of its $3.75 billion to $3.85 billion plan.
What to watch: fourth-quarter share repurchases against the $2 billion full-year plan. With $1.58 billion bought back in the first nine months, about $420 million of fourth-quarter buying will complete the annual target.
Higher Prices Outpaced Costs in Core Trash
Collection and Disposal is WM's main trash pickup, transfer, and landfill business. In the third quarter, the company raised core prices by 5.8%, which turned into a 3.4% average yield — the actual price increase collected on the revenue base. Better route efficiency also lowered operating costs in the division by 0.4 percentage points of revenue, so the spread between price increases and cost inflation added 0.4 percentage points to the company's overall operating Ebitda margin.
What to watch: Collection and Disposal average yield in the fourth quarter. Holding near 3.4% will keep full-year pricing inside the 3.2% to 3.6% target range even if inflation-linked municipal contract resets step down.
🐻 Bear Case
Commercial Account Losses Keep Trash Volumes Negative
While WM charges higher prices per bin, the total amount of trash it handles in its main Collection and Disposal business continues to shrink. Volume fell 0.4% from a year ago, or 0.5% when adjusted for workdays, marking a third straight quarter of contraction. The company blamed "intentional shedding of lower-margin residential business and commercial declines largely related to prior national account broker losses".
- Residential collection workday-adjusted volume: down 2.6% from a year ago, while yield rose 5.4%
- Commercial collection workday-adjusted volume: down 1.3% from a year ago, while yield rose 4.2%
- Municipal solid waste landfill workday-adjusted volume: down 1.1% from a year ago, after growing 0.2% last quarter
Giving up unprofitable residential routes is a deliberate choice, but losing commercial national accounts and seeing municipal landfill tonnage turn negative cuts into the highest-margin parts of the network. That leaves revenue growth reliant on price increases and fuel surcharges, which jumped 42.2% from a year ago.
What to watch: commercial collection volume in the fourth quarter. A smaller drop than 1.3% would show that new national account wins have started to replace the customers lost to lower-priced rivals.
Fuel and Insurance Bills Erased Operating Gains
"WM delivered another quarter of solid operating and financial performance, in line with our expectations, underscoring the consistent execution of our strategy," chief executive Jim Fish said. Yet direct operating expenses — the cost of running trucks, landfills, and processing plants — climbed to 59.8% of revenue from 58.9% a year ago. Those 0.9 percentage points of extra cost came "primarily related to higher fuel costs and increased risk management costs".
Fuel surcharges and higher risk management bills each took 0.4 percentage points off the company's operating Ebitda margin, excluding one-offs, which slipped 0.1 percentage points to 31.0%. Because fuel surcharges pass higher diesel costs to customers dollar for dollar without adding profit, they pad the revenue line while shrinking the percentage margin.
What to watch: fourth-quarter operating Ebitda margin, excluding one-offs. By our math, hitting the middle of the full-year profit and sales plans requires a 32.6% margin in the fourth quarter, up from 31.0% in the third.
Renewable Energy and Recycling Growth Still Trails Plan
WM is building a network of plants that sort recyclables and capture landfill gas to sell as renewable natural gas (RNG). During the quarter, it started up a new facility in New York, its eighteenth renewable gas plant since 2022, lifting Renewable Energy net revenue 6.4% from last quarter to $167 million. Recycled commodity prices averaged $82 per ton, up from $68 a year ago, while Renewable Fuel Standard credits — government credits sold with renewable gas — fell to $2.32 from $2.56.
Even with the third-quarter pickup, the sustainability businesses added about $157 million of combined operating Ebitda and landfill gas royalties over the first nine months by our math. That leaves roughly $78 million to $98 million of year-over-year profit growth needed in the fourth quarter alone to meet the $235 million to $255 million full-year growth target set at the start of the year.
What to watch: fourth-quarter combined operating Ebitda growth across Recycling Processing and Sales, Renewable Energy, and landfill gas royalties. A gain below $78 million would mean delayed pipeline hookups or lower credit prices kept the programme short of its 2026 goal.
Risks this quarter didn't answer
Four standing concerns from prior quarters received no new figures in the third-quarter earnings release.
- Pipeline hookups for two completed renewable gas plants: not mentioned in the release; the conference call or quarterly filing will show if third-party utilities connected them.
- Healthcare Solutions cross-selling profit and standalone overhead ratio: not broken out in the release; management previously targeted $50 million in cross-selling Ebitda by early 2027 and a 15% to 16% overhead rate by year-end.
- Share of medical waste cost savings booked inside Collection and Disposal: still unquantified, making it impossible to separate core trash margin gains from acquisition benefits.
- Environmental liabilities and Stericycle's Justice Department settlement compliance: no update in the release; the quarterly Form 10-Q note on commitments and contingencies will carry any changes.
👓 Other Themes
Tuck-in Acquisitions Paused After a Busy First Half
After spending $235 million on smaller waste companies in the first half of the year — already above its $100 million to $200 million annual target — WM slowed its dealmaking in the third quarter. The company spent $4 million to acquire businesses with $3 million of annualised revenue, bringing nine-month acquisition spending to $239 million for $126 million of annualised sales.
Landfill Accretion Reclassification Lifts Reported Margin
At the start of 2026, WM moved landfill accretion — the non-cash interest cost on future landfill closure obligations — out of operating expenses and into depreciation and amortisation. The change shifted $39 million in the third quarter and $117 million over nine months out of operating Ebitda, with 2025 figures restated by $35 million and $106 million to match.
💲 Other KPIs
Money owed by customers rose 7.5% from $4,055 million at year-end, and grew 8.5% from $4,017 million a year ago. That outpaced third-quarter revenue growth of 6.3% and nine-month revenue growth of 4.6%, tying up $191 million of working capital cash over the first nine months.
Total debt edged up from $23,356 million last quarter and $22,907 million at the end of 2025. The short-term portion due within a year rose to $1,524 million from $711 million at year-end, while cash stood at $247 million, leaving net debt at $23,123 million by our math.
Average diluted shares fell 1.1% from 404.3 million a year ago and 0.6% from 402.4 million in the second quarter. Resuming share buybacks after a one-year pause retired enough stock to add more than two percentage points to third-quarter per-share profit growth.
🔮 Guidance
Unchanged, and guided to the high end of the range. Reaching the $26.475 billion top end means 5.0% full-year growth, compared with 4.6% at the middle of the range. By our math, the middle of the range leaves 4.8% growth for the fourth quarter, and the high end leaves 6.4%, against 6.3% delivered in the third quarter.
Unchanged. The environmental services group has kept this target since the start of the year, pointing to 6.2% full-year growth at the $8.20 billion middle of the range on a comparable basis. By our math, that leaves $2,159 million for the fourth quarter, or 7.4% growth from a year ago, up from 5.8% growth in the third quarter.
Unchanged, and guided to the high end of the range. Reaching $3.85 billion means 31.1% full-year growth. Because the first nine months already produced $3,009 million, by our math the top end leaves $841 million for the fourth quarter — up 2.2% from a year ago, after 20.0% growth in the third quarter.
Raised. The projected cash flow table now uses $6,500 million of operating cash flow, up from the $6.30 billion to $6.45 billion range in the second-quarter filing and up 7.6% for the full year. By our math, that leaves $1,633 million for the fourth quarter, down 3.8% from $1,698 million a year ago.
Unchanged at the top of the prior range. The cash flow table projects $2,500 million for routine truck, container, and landfill spending, alongside $250 million for sustainability growth investments. With $1,937 million of total capital spent in nine months, by our math the plan leaves $813 million for the fourth quarter, down 8.4% from a year ago.
Unchanged at the low end of the prior range. After generating $79 million from asset sales over the first nine months — mostly in the first quarter — the full-year cash flow table assumes $21 million of proceeds in the fourth quarter.
Unchanged. Management affirmed its plan to buy back $2 billion of stock in 2026. Having spent $1,583 million across the first three quarters, including $580 million in the third quarter, the target leaves about $417 million of repurchases for the fourth quarter by our math.
❓ Key Questions
Have the two delayed renewable gas plants connected to pipelines?
Two finished renewable natural gas plants sat idle in the first half waiting for third-party utility hookups. Because the fourth quarter requires a large step-up in sustainability profit to meet the full-year target, investors need to know if gas is now flowing.
How much medical waste savings landed in core trash?
Management previously noted that back-office savings and medical waste routed into WM landfills help the Collection and Disposal segment rather than Healthcare Solutions. Without the exact split, outsiders cannot tell how much of the core trash margin comes from the Stericycle deal.
Did new national accounts replace the lost commercial volume?
Commercial collection volume fell 1.3% in the third quarter, which the release tied to prior national account broker losses. Last quarter, executives expected new contract wins to land in the second half; the call should clarify when commercial volumes will stabilise.
What drove the 0.4-point margin drag from risk management?
Higher risk management costs cut 0.4 percentage points from the third-quarter operating Ebitda margin, matching the drag from higher fuel costs. Management did not say whether this reflects a one-time legal or insurance reserve or a permanent step-up in claims.