Waste Management’s WM stock has had an impressive run in the year-to-date period. Shares have rallied 23.8% compared with the industry’s 22.4% growth.

The company’s earnings for 2024 are expected to increase 18% on a year-over-year basis. Revenues for 2024 are expected to rise 6% year over year.

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Factors That Auger Well for WM

Waste Management is making robust progress in its sustainability initiatives. By the end of the third quarter of 2024, the company completed 24 out of 39 planned automation and market projects, adding 1.5 million tons of annual recycling capacity across North America. Moreover, three of its 20 renewable natural gas (RNG) projects are now in service, with four more expected by year-end, contributing a total of 6 million MMBtu in annual production next year.

The acquisition of Stericycle is a key component of Waste Management's strategy to strengthen its market position. The company expects to finalize the Stericycle deal in the fourth quarter, with regulatory approvals progressing as planned. This transaction represents one of the largest acquisitions in the waste management space and will reinforce WM's position as one of the largest waste collectors in the United States. The company has acquired several other disposal firms in recent years, including Advanced Disposal and Anderson Rubbish Disposal.

Moreover, in 2024, WM invested $790 million in acquisitions, primarily within the solid waste sector, which has contributed $108 million in revenue growth.

The company’s focus on technology and automation continues to drive strong results, helping optimize its cost structure and improve operational efficiency. This is evident in the 60.6% operating expense ratio for the third quarter, which represents a 70-basis point improvement despite a 30-basis point headwind from additional workdays. This marks the fourth consecutive quarter of operating expenses below 61%, a consistent trend of improving cost efficiency.

The automation of more than 800 residential routes since 2022 has reduced reliance on manual labor, improving efficiency and safety. The use of advanced scheduling, planning tools, dynamic routing and mapping systems has also contributed to reduced operating costs, demonstrating the power of technology in driving sustainable operational improvements.

WM’s commitment to rewarding its shareholders through dividends and share repurchases is commendable. In 2023, 2022 and 2021, WM repurchased shares worth $1.3 billion, $1.5 billion and $1.35 billion, respectively. It paid out $1.14 billion, $1.1 billion and $970 million in dividends in 2023, 2022 and 2021, respectively. Waste Management plans to return significant cash to shareholders via dividends and share repurchases.

WM: Key Risks to Watch

A highly competitive environment is hurting WM's prospects, as counties and municipalities pose a significant threat to its market share. These public entities benefit from tax revenues and tax-exempt financing, giving them a financial advantage. This makes it difficult for the company to implement price increases, putting pressure on its top-line growth.

Weak liquidity does not bode well for the company. Waste Management exited the September-end quarter with a current ratio (a measure of liquidity) of 0.89. A current ratio of more than 1 is always considerable as a current ratio of less than 1 indicates that the company does not hold sufficient cash to meet its short-term obligations.

WM’s Zacks Rank

WM currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

A couple of better-ranked stocks from the broader Zacks Business Services sector are Charles River Associates CRAI and Lightspeed POS LSPD.

Charles River Associates currently carries a Zacks Rank of 2 (Buy). It has a long-term earnings growth expectation of 16%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CRAI delivered a trailing four-quarter earnings surprise of 31%, on average.

Lightspeed carries a Zacks Rank of 2 at present. It has a long-term earnings growth expectation of 55.4%.

LSPD delivered a trailing four-quarter earnings surprise of 70.8%, on average.

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