Waste Management (NYSE:WM) reported first-quarter 2026 results that management said met internal expectations, highlighting margin expansion, strong free cash flow generation, and continued progress across the company’s strategic priorities despite softer volumes tied to winter weather and the absence of prior-year wildfire-related activity.
Quarterly performance and strategic priorities
Chief Executive Officer Jim Fish said first-quarter Operating EBITDA rose “by nearly 6%” versus the prior-year period, supported by the collection and disposal business and “further supported by growth in our sustainability businesses and ongoing optimization of healthcare solutions.” Fish said the start to the year “reinforces our confidence in achieving our full-year financial guidance.”
- Growing collection and disposal: Fish said the collection and disposal business produced 6.4% Operating EBITDA growth, citing customer lifetime value focus, operational execution, and network advantages.
- Scaling sustainability returns: He said renewable energy Operating EBITDA “more than doubled” year-over-year, driven by completion of seven renewable natural gas (RNG) facilities since the first quarter of 2025. In recycling, he noted single-stream commodity pricing declined “to 27%,” yet Operating EBITDA grew 18% as automation reduced labor costs and improved material quality, with 9% higher processed volume.
- Advancing WM Healthcare Solutions: Fish said healthcare revenue was impacted by volume losses from last year, but cost controls and synergy capture drove nearly 12% Operating EBITDA growth. He said the company expects an inflection in healthcare revenue growth in the second half of 2026 as ERP stabilization continues.
- Capital allocation: Fish said first-quarter free cash flow totaled $920 million, “nearly doubling from the prior year,” enabling approximately $730 million of shareholder returns via dividends and buybacks.
Operations: pricing strength offsets softer volumes
President and Chief Operating Officer John Morris said the first quarter showed the “strength and resilience” of the operating model, even with a “softer volume environment driven largely by winter weather impacts and the absence of last year’s wildfire-related volumes.” He said strong pricing execution, technology-enabled efficiency, and cost control helped drive results.
Morris said collection and disposal Operating EBITDA grew more than 6% year-over-year, with margin expanding about 110 basis points. Operating expenses as a percentage of revenue improved 70 basis points and came in “below 60% for the consecutive Q5,” which he said reflected durable structural changes and ongoing use of automation and technology.
He also pointed to lower repair and maintenance costs year-over-year, improving about 30 basis points as a percentage of revenue, attributing gains to fleet discipline and “augmented reality tools to improve technician efficiency” along with continued fleet rightsizing.
On workforce metrics, Morris said driver and technician turnover remained low at 17.2%, improving 130 basis points year-over-year. He added that first-quarter safety performance was the company’s “best ever Q1 performance for safety-related incidents,” despite difficult winter conditions.
On the revenue side, Morris said pricing exceeded expectations. “Core price of 6.3% and yield of 3.9%” both came in above what the company expected, and core price growth in commercial and landfill lines of business each exceeded 7.5%.
Volumes started the year “softer than expected,” with Morris stating that roughly half of the shortfall in collection and disposal volumes was driven by severe winter weather. He said MSW volumes were up 2.7% and special waste volumes were up 6.7% excluding prior-year wildfire volumes. Morris also said industrial collection volumes returned to modest growth, helped by internalization of solid waste from healthcare customers. While volumes were a headwind early, he said the company expects improvement from seasonality and from lapping “a couple of larger low-margin contract losses” later in the year.
Fuel recovery was another factor. Morris said the company’s energy surcharge program recovered increases in direct and indirect fuel costs, though the higher fuel recovery revenue created a 20-basis-point drag on Operating EBITDA margin.
Cash flow, capital spending, taxes, and shareholder returns
Chief Financial Officer David Reed said first-quarter Operating EBITDA margin expansion reflected contributions across the enterprise. He attributed 110 basis points of margin expansion in collection and disposal to strong pricing and cost reductions from technology and automation, noting the results included the 20-basis-point headwind from higher fuel prices.
Reed said the recycling and renewable energy businesses together contributed about 50 basis points of margin expansion, while WM Healthcare Solutions added another 20 basis points due to cost management and synergy capture. These gains were partly offset by 40 basis points of higher spending on technology initiatives and 70 basis points from higher incentive compensation and employee benefit cost timing impacts.
Operating cash flow was $1.5 billion, up nearly $300 million year-over-year, which Reed attributed to working capital improvements and earnings growth. Capital expenditures totaled $650 million, including $61 million for sustainability growth investments. Reed said capex was about 22% lower year-over-year due to normalized spending on collection vehicles and reduced sustainability spending as projects reached completion in 2025.
Free cash flow nearly doubled to $920 million, and Reed said the company is on track to achieve full-year guidance. The company returned $385 million in dividends and resumed buybacks with $344 million of repurchases. Reed said leverage ended the quarter at 2.94x, back within the target range of 2.5x to 3.0x.
Reed also discussed production tax credits tied to the RNG business. He said the effective tax rate was about 18% in the quarter, lower than planned, largely due to production tax credits. Following IRS clarification, WM expects to realize benefits over the next several years—approximately $27 million for the 2025 tax year and $30 million to $35 million annually from 2026 through 2029. Reed said WM now expects a full-year 2026 effective tax rate of about 23%.
Key themes from Q&A: weather, wildfires, healthcare integration, and sustainability outlook
During the question-and-answer session, management provided additional detail on volume and margin cadence. Reed noted the second quarter faces a “tough comp” due to prior-year wildfire volumes, and Fish said the company saw roughly “$85 million-ish” of revenue tied to wildfire-related volume last year with strong EBITDA flow-through. Fish said that excluding the wildfire impact, margin improvement trends remain evident across the company’s business lines.
On weather, Fish said severe East Coast conditions materially affected volumes, with some facilities shut down “for as many as 10 days,” including Stericycle facilities. He also pointed to special waste performance excluding wildfire volumes as an indicator for the back half of the year, and said recent MSW volumes were running above 4% in a recent week. Fish added that industrial (roll-off) volumes turned slightly positive, reversing a multi-quarter decline, though he said the company would “take a refresh” on guidance after the second quarter.
Healthcare Solutions was a recurring topic. Fish said customer credits peaked in the fourth quarter of 2025 and declined in the first half of 2026, with a bigger year-over-year benefit expected in the third and fourth quarters. He cited operational improvements including days sales outstanding down 14 days and past-due receivables down by two-thirds over less than a year. Fish also said cross-selling delivered about $27 million of annualized EBITDA benefit, and he reiterated the company’s synergy goal of a $300 million run rate by the end of 2027, adding the company “potentially” could reach “as high as” $325 million.
On recycling commodity pricing, Senior Vice President and Chief Sustainability Officer Tara Hemmer said March exited at about $69 per ton, near the $70 per ton level WM previously guided. Hemmer said about 80% of commodities stay domestic (U.S. and Canada) and that the company is monitoring freight disruption tied to events in the Middle East. She said WM feels positive about the $70 per ton assumption and would update further in the second quarter.
Hemmer also said WM’s RNG business nearly doubled production in the quarter and that WM expects three additional RNG plants to come online in the second quarter, with the remainder in the second half. She said WM had locked in 80% of expected 2026 RNG volume, up from 60% at the time of January guidance. On the EPA’s renewable volume obligations (RVO) for 2026 and 2027, Hemmer said WM was “somewhat pleased,” noting RIN prices holding around $2.40, above the company’s long-term investment thesis of $2. She added WM believes it can sell all volume in the voluntary market at or above its $26 per MMBtu investment thesis.
Reed addressed capital allocation, saying the company began share repurchases after the prior quarter’s call and remains on track for $2 billion of buybacks in 2026, expected to be 55% to 60% weighted to the second half. He said WM expects to deploy over 90% of free cash flow toward dividends and buybacks this year while maintaining a tuck-in acquisition pipeline that had been projected at $100 million to $200 million, with a possibility of landing at the high end or above.
In closing remarks, Fish said WM is “on track to hit our guidance for the year” and credited the company’s workforce for delivering results amid weather impacts and geopolitical uncertainty.
About Waste Management (NYSE:WM)
Waste Management, Inc (NYSE: WM) is a leading provider of integrated waste management and environmental services in North America. The company offers end-to-end solutions that span collection, transfer, disposal and recycling, along with landfill operations and related infrastructure. Headquartered in Houston, Texas, Waste Management serves a broad customer base that includes residential, commercial, industrial and municipal clients.
Core services include curbside and commercial waste collection, roll-off and temporary container services, materials recovery and recycling, and engineered landfill disposal.
