Last Update22 Oct 25Fair value Decreased 0.87%
The analyst price target for Waste Connections has been modestly adjusted from $208.59 to $206.77 per share. This change reflects analysts' views on revenue growth, profit margins, and the company's differentiated strategy within a resilient waste management sector.
Analyst Commentary
Bullish Takeaways- Bullish analysts highlight the company’s differentiated strategy, which leverages a mix of exclusive or franchise contracts and strong positions in secondary and rural markets.
- The robust M&A pipeline is seen as offering a long-term growth runway. This supports the view that Waste Connections can continue expanding through strategic acquisitions.
- Stable demand in the waste and water infrastructure segments is expected to provide resiliency throughout various economic cycles, underlining the company’s defensive qualities.
- The positive sector outlook, along with recent pullbacks in share prices, is seen as creating buying opportunities relative to peers. Valuation is considered attractive when paired with execution strength.
- Bearish analysts express caution over the company’s significant exposure to franchise and exclusive contracts. This may limit flexibility or lead to pricing pressure in highly regulated regions.
- Competition across the North American environmental services sector may put pressure on margins and slow the pace of market share gains.
- Valuations at current levels, despite recent adjustments, could reflect much of the anticipated growth. This may leave less room for upside if operational performance moderates.
What's in the News
- The Board of Directors has approved an 11.1% increase in the regular quarterly cash dividend, raising it to $0.35 per common share. This will be effective for shareholders of record as of November 5, 2025 (Key Developments).
- The company completed the repurchase of 1,299,339 shares, representing 0.5% of outstanding shares, for $240.61 million between April 1 and July 24, 2025 (Key Developments).
- Waste Connections has announced a normal course issuer bid to repurchase up to 12,855,691 shares, equivalent to 5% of issued and outstanding shares. The program will run until August 11, 2026, or earlier if completed or terminated (Key Developments).
Valuation Changes
- Fair Value Estimate has decreased modestly from $208.59 to $206.77 per share, reflecting a slight adjustment in analysts' expectations.
- Discount Rate has remained nearly unchanged, moving marginally from 6.85% to 6.85%.
- Revenue Growth Forecast has declined from 6.86% to 6.52%, indicating slightly softer projected expansion.
- Net Profit Margin is expected to improve, rising from 14.20% to 14.77%.
- Future Price-to-Earnings (P/E) Ratio has fallen from 40.54x to 39.02x, indicating a lower valuation based on expected future earnings.
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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