Last Update 25 Nov 25
Fair value Decreased 0.20%WCN: Long-Term Margin Expansion Will Be Driven By Acquisitions And Buybacks
Analysts have slightly lowered their average price target for Waste Connections to $204.96 from $205.36. They cite near-term margin pressures and moderated growth expectations, despite continued confidence in the company's acquisition strategy and resilient core business.
Analyst Commentary
Analysts have recently updated their research on Waste Connections, providing a mix of encouraging observations and points of caution as the company navigates evolving market dynamics.
Bullish Takeaways- Bullish analysts continue to view Waste Connections as a high-quality compounder. They cite its track record of value-accretive acquisitions and a robust pipeline of opportunities for future growth.
- Some research sources note that the company has shown resilience in macro-challenging periods. It has consistently topped quarterly expectations and maintained solid execution in its core business operations.
- Multiple price target increases reflect confidence in the company’s path to margin expansion. This outlook is supported by higher employee retention, targeted infrastructure investments, and improved price retention across business lines.
- Waste Connections’ differentiated strategy, including exclusive and franchise contracts along with a focus on secondary and rural markets, is viewed as providing a long runway for mergers and acquisitions and future scale.
- Bearish analysts have moderated their estimates for earnings growth in the near term. They cite margin pressures and the potential for slower contributions from new renewable natural gas (RNG) projects.
- Portions of the business lacking pricing power, especially in recycled materials and specialty waste, have faced headwinds because commodity prices, such as recycled cardboard, remain subdued.
- Cautious commentary points to relative valuation concerns and the impact of market conditions on segments outside the company’s core solid waste business. These factors are weighing on expectations for 2026 and beyond.
What's in the News
- The company reaffirmed its earnings outlook for the full year 2025 and issued fourth quarter guidance, expecting approximately $2.36 billion in revenue (Corporate Guidance).
- The company completed a share repurchase of 569,660 shares, or 0.22%, for $103.3 million under the July 2025 buyback program (Buyback Update).
- The company completed a share repurchase of 1,823,691 shares, or 0.71%, for $579.11 million under the August 2024 buyback program (Buyback Update).
- The company announced an 11.1% increase in the regular quarterly dividend to $0.35 per common share, effective November 20, 2025 (Dividend Increase).
Valuation Changes
- Consensus Analyst Price Target has decreased marginally to $204.96 from $205.36.
- Discount Rate has risen slightly, now at 6.89%, compared to 6.75% previously.
- Revenue Growth Forecast has declined, moving from 6.65% to 6.46%.
- Net Profit Margin estimate has fallen moderately, shifting to 13.76% from 14.77%.
- Future Price-to-Earnings (P/E) Ratio has increased to 40.1x, up from 37.1x.
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.
How well do narratives help inform your perspective?
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.
Read more narratives
There are no other narratives for this company.
View all narratives