WM, formerly known as Waste Management, is facing challenges in the market despite a solid performance in its core waste collection and disposal operations. In the third quarter of 2025, the company reported adjusted diluted earnings per share of $1.98, falling short of analyst expectations, which had anticipated a figure of $2.01. This result represents only a 1% increase compared to the same quarter in 2024. While the core business produced record results, the recycling and healthcare segments underperformed substantially.
The company’s recycling division has encountered hurdles, with a notable decline in revenue attributed to falling market prices for recycled commodities. Notably, the recycling processing and sales segment saw a $60 million revenue decline, largely due to a significant 35% drop in the average price of single-stream recycled materials, which includes a mix of different recyclables collected in a single bin. The average revenue received for single-stream recycled commodities plummeted from $101 per ton a year ago to just $68 per ton this year. Additionally, WM is now guiding for a decrease in the projected price for single-stream commodities, from $80 to $75 per ton for 2025.
The healthcare solutions segment also did not meet expectations, with WM deciding to defer price increases to maintain customer loyalty. This decision contributed to the company’s weak revenue guidance for the upcoming year, with total revenue anticipated to be around $25.2 billion, at the lower threshold of previous estimates.
Despite these setbacks, WM is positioned to continue rewarding its shareholders. The company forecasts a robust free cash flow of between $2.8 billion and $2.9 billion for 2025, with an even more ambitious projection of $3.8 billion for 2026. WM’s free cash flow is significantly higher than the approximately $1 billion it distributed in dividends over the first three quarters of 2025, enhancing its capacity to maintain and potentially increase dividend payouts.
Currently, WM offers a dividend of $3.30 per share, translating to a yield of roughly 1.5%. Given its strong free cash flow predictions, analysts believe the company may implement a dividend increase similar to the 10% hike seen last December, marking a consistent history of dividend growth over the past 22 years.
Investors focused on steady income rather than high-risk growth opportunities may find WM to be an attractive prospect. Its core business model is designed to withstand various economic cycles and remains critical regardless of market conditions. Moreover, as WM navigates the cyclical nature of its business while also engaging in innovative recycling and renewable energy initiatives, its strategic positioning allows for long-term growth prospects.
Although the stock may not boast the allure of high-growth tech investments, its relatively lower valuation, trading at 27.4 times projected earnings for 2025, could appeal to risk-averse investors. The company’s historical price-to-earnings ratio indicates that investors have traditionally valued it at a premium, suggesting that its current pricing is more reasonable than in recent years.
However, potential investors may wish to approach with caution, as WM was not included in a recent selection of top investment picks by prominent analysts. While the stock may provide reliable dividends, an assessment of other high-potential stocks could be beneficial for those seeking greater capital appreciation.
As WM adapts to its present challenges and recalibrates its revenue expectations, the focus will remain on its ability to sustain dividend payouts while investing strategically in growth areas amidst shifting market dynamics.
