Last Update08 Oct 25Fair value Decreased 1.12%
Analysts have slightly lowered their price target for Waste Connections, reducing the fair value from $210.95 to $208.59. They cited marginally softer growth and profitability expectations but affirmed confidence in the company’s long-term strategy and market position.
Analyst Commentary
Street research following recent coverage highlights both the growth opportunities and some areas of caution for Waste Connections as analysts reassess its trajectory in the solid waste sector.
Bullish Takeaways
- Bullish analysts point to the company’s “differentiated strategy,” emphasizing exclusive or franchise contracts for about 40% of its business. This supports steady revenue streams and market positioning.
- There is confidence in the company’s ability to continue executing on an M&A strategy, which is seen as a key driver for long-term growth and consolidation in largely secondary and rural markets.
- Secular demand for waste and water infrastructure provides a relatively stable foundation across market cycles and offers resilience against economic fluctuations.
- Despite a sector pullback, the current valuation is considered to offer select buying opportunities, particularly for companies with stable demand profiles like Waste Connections.
Bearish Takeaways
- Bearish analysts express some caution around softer near-term growth and profitability expectations, which have prompted modest price target reductions.
- The company’s significant exposure to secondary and rural markets may pose occasional challenges in maintaining higher growth rates or operational efficiency compared to more urban peers.
- While industry demand is characterized as resilient, competition and consolidation trends suggest ongoing pressure on margins if Waste Connections is unable to maintain its differentiated edge.
- Recent price targets from analysts reflect a balance of optimism for strategic execution and caution regarding sector-wide headwinds.
What's in the News
- Waste Connections announced a share repurchase program, approving the buyback of up to 12,855,691 shares (5% of its issued and outstanding shares), subject to regulatory approval. All repurchased shares will be cancelled. The bid expires August 11, 2026 (Key Developments).
- The company repurchased 1,299,339 shares between April 1 and July 24, 2025, at a total cost of $240.61 million, completing the first tranche under the recently announced buyback program (Key Developments).
- The Board of Directors authorized the share buyback plan on July 22, 2025 (Key Developments).
- Waste Connections updated earnings guidance for 2025, forecasting approximately $9.45 billion in revenue and $1.14 billion in net income (Key Developments).
Valuation Changes
- Consensus Analyst Price Target (Fair Value): Lowered modestly from $210.95 to $208.59, reflecting the updated outlook.
- Discount Rate: Increased slightly from 6.77% to 6.85%. This suggests a marginally higher risk premium applied to future cash flows.
- Revenue Growth: Decreased from 7.09% to 6.86%. This indicates softer growth expectations going forward.
- Net Profit Margin: Declined from 14.56% to 14.20%, reflecting a minor reduction in anticipated profitability.
- Future P/E Ratio: Risen slightly from 39.65x to 40.54x. This signals a marginal increase in the valuation multiple being used.
Key Takeaways
- Effective pricing and acquisition strategies, along with strong employee retention, position Waste Connections for robust revenue and margin growth.
- Enhanced safety performance and strategic recycling facility integration contribute to cost savings and expanded service capabilities, supporting future growth.
- Heavy reliance on acquisitions and volatile commodity-driven revenues pose risks to margins, while weather events and geopolitical factors add uncertainty to future earnings.
Catalysts
About Waste Connections- Provides non-hazardous waste collection, transfer, disposal, and resource recovery services in the United States and Canada.
- Waste Connections’ pricing strategy has shown strong execution with a price-led organic solid waste growth, resulting in high visibility for full-year 2025 core pricing of at least 6%, which is expected to positively impact their revenue.
- The company’s reduction in voluntary turnover and improved employee retention for ten consecutive quarters indicate a healthier company environment, likely supporting operating efficiencies and margin expansion, thereby positively impacting net margins.
- Record safety performance and reduced incident rates are anticipated to unlock incremental cost savings in future periods, contributing to cost control and improved adjusted EBITDA margins.
- Robust acquisition activity, with annualized revenues closed already over $125 million, and a strong balance sheet position Waste Connections well for continued growth and successful integration of acquisitions, supporting future revenue and earnings growth.
- The integration of a strategic state-of-the-art recycling facility in New Jersey is expected to complement their expanding New York City franchise, potentially enhancing service capabilities and driving revenue growth.
Waste Connections Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Waste Connections's revenue will grow by 7.1% annually over the next 3 years.
- Analysts assume that profit margins will increase from 7.0% today to 14.6% in 3 years time.
- Analysts expect earnings to reach $1.7 billion (and earnings per share of $6.62) by about September 2028, up from $643.8 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $1.4 billion.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 39.7x on those 2028 earnings, down from 70.9x today. This future PE is greater than the current PE for the US Commercial Services industry at 25.7x.
- Analysts expect the number of shares outstanding to decline by 0.23% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 6.77%, as per the Simply Wall St company report.
Waste Connections Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The protracted weather events in many markets caused incremental volume weakness, indicating potential risks to future revenue and margins if severe weather becomes more frequent.
- Despite generally favorable conditions, the discussion of geopolitical factors such as tariffs suggests there could be unexpected capital or expense increases in the future, which may impact earnings.
- The company's growth strategy relies heavily on acquisitions, which could pressure net margins if integration challenges arise or if acquisition synergies do not materialize as expected.
- Concerns about potential changes in interest rates and financial market fluctuations indicate a risk to financing costs and capital expenditures, potentially affecting net income.
- Commodity-driven revenues remain volatile, with factors such as changes in OCC and RIN prices affecting financial results, which could lead to unpredictable impacts on revenue and margins.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $210.947 for Waste Connections based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $227.0, and the most bearish reporting a price target of just $150.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $11.3 billion, earnings will come to $1.7 billion, and it would be trading on a PE ratio of 39.7x, assuming you use a discount rate of 6.8%.
- Given the current share price of $177.61, the analyst price target of $210.95 is 15.8% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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