* Waste Management is exploring the sale of its renewable natural gas business.
Our shares of Waste Management (WM) were moving higher on reports the company is working with JP Morgan (JPM) to explore the sale of its renewable natural gas business which could be worth about $3 billion.
The business generated $1.3 billion in sales but accounted for ~6% of Waste’s total revenue, making it in our view, a small and arguably non-core business.
Previously, the company targeted investing ~$1.2 billion in the business between 2022-2025, but the sale would not only bring in capital it would also allow management to redirect those investment dollars. If the sale is accomplished, potentially to an energy company or perhaps even private equity, received funds could be used to accelerate the rollout of automated trucks, make acquisitions or reduce leverage on the company’s balance sheet.
Any of those moves could warrant revisiting EPS expectations and potentially our price target.
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At the time of publication, TheStreet Pro Portfolio was long WM.