WM's 2026 Outlook Tests Whether Margin Gains Can Offset Softer Volumes

WM WM lowered its 2026 revenue outlook after second-quarter results as weaker Collection and Disposal volumes became the main pressure point. The revised guidance shifts investor attention from top-line growth to the durability of margins and cash flow.

Pricing, productivity and faster-growing businesses are doing more of the work. The question is whether those levers can keep earnings momentum intact while core volumes remain soft.

WM Cuts Revenue Guidance as Volumes Weaken

WM now expects 2026 revenues of $26.275-$26.475 billion, down from the prior $26.43-$26.63 billion range. Management attributed the reduction mainly to lower volume expectations, partly offset by higher energy surcharges.

Collection and Disposal volumes are expected to decline nearly 1% for the full year. Management expects relatively flat volumes in the second half, leaving volume softness as the clearest constraint on the revised outlook.

Waste Management Raises Its Margin Expectations

The weaker revenue forecast did not alter WM’s adjusted operating EBITDA target of $8.15-$8.25 billion. The company instead raised its adjusted operating EBITDA margin outlook by 20 basis points to 31%-31.2% from 30.8%-31%.

That combination points to confidence in pricing, cost flexibility and productivity. Maintaining the EBITDA range despite lower revenues suggests WM expects operating discipline to absorb part of the volume drag.

WM’s Second Quarter Shows the Margin Playbook

Second-quarter revenues increased 4% year over year to $6.68 billion, supported by a 5.7% core price increase. Adjusted operating EBITDA margin expanded 40 basis points to 30.9% even as Collection and Disposal volume declined 1.8%.

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Adjusted earnings of $2.02 per share beat the Zacks Consensus Estimate of $1.99 by 1.5%. Collection operating costs rose less than 1.7% despite labor cost increases of about 4%, illustrating how pricing and productivity are protecting profitability.

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Waste Management’s Newer Businesses Add Support

Combined adjusted operating EBITDA from recycling and renewable energy increased 32.5% year over year, driven by higher recycling volumes, automation efficiencies and increased renewable natural gas production. Healthcare Solutions lifted its adjusted operating EBITDA margin to 19% from 17%.

Republic Services, Inc. RSG also operates across recycling, solid waste and environmental services, while Clean Harbors, Inc. CLH provides hazardous-waste, industrial and recycling services. Those business mixes show how environmental-services companies can broaden earnings sources beyond traditional collection activity.

WM’s Cash Flow Outlook Raises the Stakes

WM maintained 2026 free cash flow guidance of $3.75-$3.85 billion after generating $2.02 billion in the first half, up more than 56% year over year. Operating cash flow reached $3.23 billion over the same period.

Cash generation supports capital investment, integration spending and shareholder returns, but leverage remains relevant. WM ended the second quarter at 2.96 times leverage, while current debt was $1.08 billion and long-term debt was $22.28 billion.

WM’s Ratings Reflect a Balanced 2026 Setup

WM’s 2026 setup remains balanced. Margin expansion and cash generation are offsetting softer volumes, but they do not remove leverage and execution risks tied to the revised revenue outlook.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Its VGM Score of B, Growth Score of B and Momentum Score of B point to favorable characteristics in those styles, while the Value Score of C is more neutral. Together, the ratings support a measured view as investors assess whether margin gains can continue to offset weaker volumes.

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This article originally published on Zacks Investment Research (zacks.com).

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