We're Lifting Our Price Target for This Sanitation Play After Quarter Beat

We are boosting our price target for Waste Management WM shares to $235 from $220 but maintaining our Two rating. 

This move follows Tuesday's September quarter beat and upped outlook, but we’re also factoring in prospects for further margin improvement in 2025. We see this coming as Waste continues to reap the benefits of investments this year in automated trucks, even as we see a softer pricing environment ahead. This should drive further margin expansion at the company’s Collection and Disposal business (90% of revenue and all of its profits) especially as the management team integrates its solid waste nip and tuck acquisitions completed this year.

What our new price target does not include is the pending acquisition of Stericycle SRCL, which should close later this quarter and expand Waste’s reach into the medical waste market. We see that as a nice complement to our position in Labcorp LH, and one that should grow nicely alongside the medical test market. We also suspect it will follow the same path as Waste’s solid waste business, meaning nip-and-tuck acquisition opportunities. Once that acquisition is closed and the Waste management team has shared not only the revenue benefits but near and longer-term cost savings opportunities, we’ll factor that into our price target.

Following the strong pop in WM shares, we would suggest members let them cool off and let the likely euphoria over other price target increases like ours fade. As that happens, we’ll look to acquire more WM shares for the Portfolio.

As we make this price target increase, we’ll also nudge our WM panic point to $185 from $183.

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At the time of publication, TheStreet Pro Portfolio was long WM and LH.