Waste Management (WM) Rises But Trails Market: What Investors Should Know

Waste Management (WM) closed up 0.26% at $237.76, trailing the S&P 500's daily gain, and has underperformed both the S&P 500 and its sector over the past month. The company's upcoming earnings release is expected to show a 4.4% year-over-year EPS increase to $1.90 and a 17.8% revenue increase to $6.36 billion; full-year estimates project a 4.84% EPS increase and a 15.84% revenue increase. WM currently holds a Zacks Rank of #3 (Hold), with its Forward P/E ratio of 31.29 trading at a premium compared to its industry's average of 27.24.

Analysis

Waste Management (WM) recently closed at $237.76, reflecting a +0.26% daily increase, though this trailed the S&P 500's 0.4% gain. Over the past month, WM's stock appreciation of 1.62% has notably underperformed both the S&P 500's 6.69% rise and its Business Services sector's 7.08% gain. The company's upcoming earnings report is a key focus, with projections indicating earnings of $1.90 per share, a 4.4% year-over-year increase, and net sales of $6.36 billion, up 17.8% from the year-ago period. For the full fiscal year, Zacks Consensus Estimates anticipate earnings of $7.58 per share (+4.84% YoY) and revenue of $25.56 billion (+15.84% YoY). Despite these growth projections, the Zacks Consensus EPS estimate has seen a minor downward revision of 0.22% in the last 30 days, and WM currently holds a Zacks Rank of #3 (Hold). From a valuation perspective, WM trades at a Forward P/E ratio of 31.29, which is at a premium compared to its industry's average of 27.24. Its PEG ratio of 3.14 is slightly below the industry average of 3.27. Furthermore, the Waste Removal Services industry, to which WM belongs, holds a Zacks Industry Rank of 141, placing it in the bottom 43% of over 250 industries, suggesting potential broader sector challenges.

Key Decisions for Investors

• Investors should closely scrutinize Waste Management's upcoming earnings release for confirmation of projected revenue growth and any commentary on factors impacting the modest EPS growth expectations.
• Given the stock's recent underperformance relative to the market and its sector, coupled with a premium Forward P/E ratio and a 'Hold' rating, a cautious stance may be warranted pending further catalysts.
• Monitor any shifts in analyst estimates post-earnings and consider the relatively low ranking of the Waste Removal Services industry when assessing long-term exposure to WM.