Waste Management Inc reported third-quarter FY2026 results on October 27, 2026, delivering earnings per share of $2.15 against a consensus estimate of $2.18, a miss of 1.38%. Revenue came in at $6.85 billion versus estimates of $6.81 billion. The stock traded down roughly 3.16% to $228.36 as of October 28, 12:37 PM EDT, suggesting the market penalized the slight EPS shortfall more than the underlying fundamentals might imply.
What the company answered
- Healthcare Solutions: Revenue for the Healthcare Solutions unit increased year over year for the first time since the acquisition, while operating EBITDA expanded by 33%. Selling, general and administrative expenses in the unit fell to 15.2% of revenue, an improvement of 390 basis points, allowing the unit to reach its year-end SG&A target earlier than planned.
- Margins and fuel: Consolidated operating EBITDA margin remained at 31% in the quarter in spite of record diesel prices. Management said the company’s energy surcharge program recovered the higher fuel expense, supporting stable margins.
- Cash generation: Free cash flow rose 20% in the quarter. For the nine months, free cash flow exceeded $3 billion, an increase of 42% year over year, driven in part by capital expenditures that declined by more than 17%. Management returned over 90% of free cash flow to shareholders during the period via $1.58 billion in share repurchases and $1.14 billion in dividends.
- Guidance and leverage: Management reiterated that operating EBITDA is expected to come in within its previously communicated range and said revenue and free cash flow are expected at the high end of their ranges. Net leverage stood at 2.92x, inside the company’s 2.5x to 3x target band.
- Leadership: CEO Jim Fish is set to retire in early January, and President John Morris will assume the CEO role, completing the planned succession.
Open questions and unresolved items
- Insurance and risk costs: Insurance and risk-related costs increased by approximately $63 million year over year. Management attributed the rise to an actuarial adjustment, several large loss claims, and a difficult comparison with a prior-year insurance recovery. Management maintained that the charge is not a trend, but the company indicated this item likely contributed to the EPS shortfall.
- Volume trends: Aggregate volume remains down about 1% year to date. The company described residential losses as intentional, and national-account broker attrition continues to weigh on volumes. That said, revenue growth remains driven primarily by pricing.
- Q4 EBITDA shape: During the call an analyst asked if fourth-quarter EBITDA would fall to the low end of an approximately $100 million range, but the publicly available excerpt does not include management’s response to that question.
- Estimate drift: Consensus EPS estimates have edged down by 1.09% over the past 90 days and by 4.42% over the last year.
Quarterly beat/miss pattern and stock reaction
| Quarter | EPS vs Est | Price Reaction |
|---|---|---|
| FY2025 Q4 | -1.03% | -3.55% |
| FY2026 Q1 | +4.02% | +1.82% |
| FY2026 Q2 | +1.51% | -0.55% |
| FY2026 Q3 | -1.38% | -3.16% (day-after move) |
The pattern shows that the two quarterly misses in this sample were followed by roughly 3% declines in the stock. This suggests the market is particularly sensitive to cost surprises even when revenue holds up.
Near-term catalysts to watch
- CEO transition - The January leadership handoff to John Morris will be the first practical test of continuity under new management.
- FY2026 Q4 report - The next quarterly report is tentatively scheduled for February 3, 2027, pre-market. Consensus expectations for that release are EPS of $2.10 and revenue of $6.70 billion. The same report will provide 2027 guidance; consensus FY2027 EPS is $9.04, about 11% above the current FY2026 estimate of $8.11, so forward guidance will need to support that level of upside to sustain consensus expectations.
- Q1 2027 (March quarter) - Consensus EPS for the seasonally softer first quarter of 2027 is $1.97.
- Insurance normalization - Another actuarial surprise or additional large-loss claims would undermine management’s assertion that the recent insurance cost increase is not a trend.
- Capex and buybacks - With sustainability-related capital spending approaching completion, a roll-off in capex could keep free cash flow elevated and create room for continued share repurchases.
- Pricing versus volume - The principal growth driver remains core price realization at the high end of guidance; volume and commodity swings such as fuel and recycling prices are secondary sources of variability.
Bull and bear considerations
- Bull case: Strong cash conversion, early signs of recovery in Healthcare Solutions, and guidance pointing to revenue and free cash flow at the high end of ranges are constructive. The shares are up 11.8% over the last year.
- Bear case: Earnings quality faces pressure from higher insurance costs and flat-to-negative volumes. Analyst estimates have drifted lower, and the impending CEO transition adds an execution risk component.
Bottom line
Waste Management’s Q3 delivered a modest EPS miss alongside revenue slightly above estimates, robust free cash flow growth, and early operational progress in its Healthcare Solutions unit. The market’s negative reaction appears to reflect sensitivity to cost volatility, particularly the insurance and risk-cost increase. Key upcoming items for investors include the CEO succession, the Q4 report and 2027 guidance, and whether insurance costs normalize as management has indicated they expect.