Waste Management Inc.WM

Morningstar Rating

Stock Research and Analysis

by Bradley Meeks

Despite a slowdown in waste volumes from residential and industrial construction, we think Waste Management, the nation's largest trash disposal firm, will continue to provide increased profitability via higher prices and its asset optimization program. Read more

Bulls Say

Waste management companies typically demonstrate strong business models during recessionary periods due to the essential nature of their services, providing strong and fairly predictable cash flow.

The company's strong cash flow has allowed it to increase its dividend by 9% to $1.26 per share this year. Further, the firm continually repurchases shares of stock, benefiting shareholders.

About 64% of the firm's markets have both collection operations and at least one landfill. Integrated markets help operating margins, since Waste Management avoids paying tipping fees to use other companies' landfills. Read more

Bears Say

With roughly 70% of all domestic disposal capacity in the hands of just two firms--Waste Management and Republic Services--any irrational pricing to steal market share could erode margins.

Lower waste volumes in the residential and industrial segments are a byproduct of a weak economy. If the slowing economy persists and the firm is unable to offset lower waste volumes with higher prices, profitability could be severely affected.

Recent price increases have resulted in waste volume loss. The current positive trade-off between higher collection yield and lower collection volume could reverse if waste volume losses unexpectedly accelerate.

Approximately 25% of the company's employees are covered by collective bargaining agreements. Any disruption or worker strike could increase Waste Management's costs and reduce profitability. Read more

Strategy

The company will continue to focus on maximizing return on capital via price increases and cost-containment initiatives, which has served them well. These initiatives start with disciplined pricing in Read more

Management

Prior to taking the lead as CEO and director in 2004, David Steiner served in various capacities throughout the firm, including executive vice president and CFO from 2003 to 2004, and as senior vice president and general counsel from 2001 to 2003. Steiner Read more

Profile

Founded in 1894, Waste Management is the nation's largest provider of collection, transfer, recycling, disposal, and waste-to-energy services. The firm serves nearly 20 Read more

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