Waste Management stock price target raised to $275 by Scotiabank

Scotiabank raised Waste Management's (WM) price target to $275 from $265, maintaining a Sector Outperform rating, following the company's better-than-expected recent second-quarter results. WM reported Q2 EPS of $1.92 and revenue of $6.43 billion, surpassing forecasts due to strong special waste volumes, positive pricing, and cost efficiencies, despite commodity price pressures. Scotiabank highlighted an improved 2025 margin and free cash flow outlook, ongoing synergies from the Stericycle acquisition, and a relatively attractive valuation at 15.6x EV/EBITDA, even as InvestingPro analysis suggests the stock may be trading above its fair value.

Analysis

Scotiabank has raised its price target for Waste Management (WM) to $275.00 from $265.00, reaffirming a Sector Outperform rating. This revision is predicated on the company's second-quarter 2025 results, which surpassed analyst expectations with an EPS of $1.92 against a $1.90 forecast and revenue of $6.43 billion versus a $6.37 billion estimate. The performance was driven by robust special waste volumes, positive pricing, and effective cost management, which successfully mitigated headwinds from commodity prices. Despite trimming its revenue guidance due to these commodity pressures, Waste Management has improved its 2025 margin and free cash flow outlook, supported by a more favorable business mix and bonus depreciation benefits. The acquisition of Stericycle (SRCL) is a key component of the bullish thesis, cited as a driver for ongoing margin expansion with potential for upside surprises on synergies. Scotiabank considers the valuation attractive at 15.6x 2025E EV/EBITDA with a 3.0% free cash flow yield, though this contrasts with InvestingPro analysis suggesting the stock may be trading above its fair value.

Key Decisions for Investors

• Investors should consider the strong operational momentum, evidenced by the Q2 earnings beat and improved 2025 margin and FCF outlook, as a positive signal for the company's fundamental health.
• It is crucial to weigh Scotiabank's favorable valuation view against the conflicting signal from InvestingPro, which suggests the stock may be overvalued, warranting a careful assessment of entry points.
• Monitor the impact of commodity price pressures, as this was the explicit reason for the company's trimmed revenue guidance and remains a key risk to top-line performance.
• The successful integration of Stericycle and the realization of guided synergies are critical catalysts for future margin expansion and should be closely tracked.