Company Information

Waste Management, Inc. is a holding company, which engages in the provision of waste management environmental services. It operates through the following segments: Tier 1, Tier 2 and Tier 3. The Tier 1 segment comprises of areas in the Southern United States. The Tier 2 segment comprises of areas located in the Midwest and Northeast United States. The Tier 3 segment comprises all remaining areas, including the Northwest and Mid-Atlantic regions of the United States and Eastern Canada. The company was founded on September 30, 1987 and is headquartered in Houston, TX.

Executive Summary

Investment Thesis: Waste Management Inc is an industry leader in a space that is fairly consolidated with high barriers to entry and low threats of entrants in the long and short run primarily due to the time taken to establish a company’s reputation and ability to maintain constant and growing revenue streams in the future. The positive outlook for construction, manufacturing is also projected to aid in the boating revenues over the next two years. Growth in the yield and volume of collection and disposal business is estimated to be at 4.5% over the year which would aid in recovery of lost revenues in 2020. Increases and improvements in ESG commitments along with improvements in the conversion of natural gas in multiple landfills owned by the company would aid in its wrestling with the threats imposed by increased regulation in the waste management industry.

Investment Merits: 

• Industry-leading position: largest waste collection, transportation, and disposal business in the United States

• Recent acquisition of Advanced Disposal Services (NYSE:ADSW), the fourth-largest waste company in the U.S.  with a $300 million discount.

• Dividends- Has seen 17 years of consecutive growth in dividends with average annualized increase in the dividend at around 6%. Current Yield of 2.09%

• Set aside $1.35 billion in 2021 for potential buybacks

• Strong free cash flows of $1.8 billion, half of that was distributed to shareholders in the form of dividends and the rest was reinvested into the company.

• CEO Jim Fish states that WM will look to making permanent use of cost cutting measures that were implemented during the Covid Pandemic.

• Increased use of automation in waste collection services from trucks to landfills have helped to decrease expenditures and expand WM margins

• Essential Service- even if economy is in downturn like 2020, demand and revenue was still relatively stable for this type of company.

Investment Risks: 

Climate Change, Regulation, and Waste Management  - Under the Biden Administration, complex scientific discussions about carbon sequestration and emissions accounting are becoming more mainstream—with a heightened level of interest with Biden's administration. 

Acquisition of Advanced Disposal Services - Regulators at the U.S. Department of Justice (DOJ) pushed for Waste Management to divest assets generating around $300 million worth of revenue that the company was willing to acquire as part of the buyout of Advanced Disposal.