Waste Management Q3 2026: EPS jumped 38% to $2.05, but adjusted EPS rose 8.6% as write-downs dropped out

WM (formerly Waste Management) grew third-quarter 2026 revenue 6.3% to $6.85 billion, and reported earnings per share jumped 37.6% to $2.05. Most of that EPS jump is a comparison effect: a year ago WM booked $218 million of write-downs and other one-off charges, and this quarter it booked $18 million. On the company's adjusted basis, which strips those items out of both years, EPS rose 8.6% to $2.15. The release came out on October 27 as an earnings 8-K; the full 10-Q, with management's segment-by-segment explanations, has not been filed yet, so this analysis works from the release's financial statements and schedules.

Results

Operating EBITDA is income from operations before depreciation, depletion, amortization and accretion: roughly the cash profit the business generates before the cost of wearing out its trucks and filling its landfills. It is WM's main profit measure and the basis of its guidance. Note that from 2026 WM moved landfill accretion expense ($39 million this quarter, $35 million a year ago) out of operating expenses; 2025 figures are restated to match, so the comparison is like for like.

Where the revenue growth came from

WM's revenue bridge splits the $403 million increase:

Two things stand out. First, more than a quarter of the growth ($112 million) is fuel surcharges: fees WM adds to bills when diesel costs rise. They pass a cost on to customers, so they lift revenue without adding much profit, which is part of why the margin percentage slipped. Excluding them, revenue grew about 4.5%.

Second, the core trash business is still losing volume. Collection and Disposal volume fell 0.5% on a workday-adjusted basis (adjusted for the number of business days in the quarter). Commercial volume fell 1.3% and residential 2.6%. WM attributes this to "intentional shedding of lower-margin residential business and commercial declines largely related to prior national account broker losses." Pricing more than made up for it: core price, WM's measure of the price increases it pushes through to existing customers, was 5.8%, and residential yield rose 5.4% while its volume shrank. The company-wide volume figure is positive (+0.8%) only because the recycling and renewable-natural-gas (RNG) plants WM built in 2022–2025 are processing and selling more.

Segment performance

Of the $116 million increase in adjusted operating EBITDA, $79 million came from the three smaller businesses and only $60 million from Collection and Disposal, which is 81% of revenue; corporate costs rose $23 million.

• Collection & Disposal: the margin fell 70 basis points (0.7 percentage points). The release says price running ahead of costs added 40 basis points, but higher fuel costs and higher "risk management costs" (WM's term; the release does not break them down, but for a waste hauler these are typically insurance and accident claims) each took away 40 basis points at the company level. Operating expenses rose to 59.8% of revenue from 58.9%.
• Recycling: the blended price WM received for single-stream recycled material rose to about $82 a ton from about $68, which carried both revenue and profit. Last year's reported segment loss ($137 million) included a $155 million write-down tied to suspending a business.
• Renewable Energy: revenue rose 45% as new plants came online (WM opened its eighteenth new RNG facility since 2022, in New York, during the quarter). Prices were mixed: Renewable Fuel Standard credits (the federal credits RNG producers sell) averaged $2.32 versus $2.56, natural gas $2.56 per MMBtu versus $2.46. The segment's margin fell to 38.9% from 41.7%, in line with the lower credit price; the release does not give a reason.
• Healthcare Solutions (the former Stericycle medical-waste business): income from operations swung to $20 million from a $21 million loss, the "$41 million" increase in the release's headline. The revenue bridge credits only $1 million of the segment's $23 million revenue increase to price and volume combined, so the business is no longer shrinking but is not yet growing on its own; the profit gain comes from what the CEO calls "effective cost management, synergy capture, and pricing growth." WM still excluded $30 million of Stericycle integration costs this quarter from its adjusted figures.

What the headline numbers hide

• The GAAP jump is mostly an easy comparison. Income from operations rose 29.3%, but on WM's adjusted basis it rose 7.1% ($1,329 million vs $1,241 million). Last year's quarter carried $252 million of excluded items: $218 million of impairments and unusual items plus $34 million of Stericycle integration costs. This year's excluded items total $50 million: $30 million of Stericycle costs, an $18 million write-down for closing an East Tier landfill early, and $2 million of union-contract costs. Notably, WM took a $45 million charge for accelerating a landfill closure in the same East Tier a year ago; landfill closure write-downs have now shown up two years running.
• Adjusted EPS growth is mostly operations. Adjusted net income rose 7.1%; diluted shares fell 1.1% (399.8 million vs 404.3 million) because WM restarted buybacks this year, which explains about 1 point of the 8.6% adjusted EPS growth. The adjusted tax rate was 21.5% versus 21.9%, a small help. Net interest expense rose to $237 million from $225 million, a small drag.
• Cash conversion is strong, but free cash flow growth leans on lower capital spending. Operating cash flow of $1,640 million was twice net income, which is normal for a business with $792 million of quarterly depreciation and depletion. Free cash flow (operating cash flow minus capital spending, plus asset-sale proceeds) rose $164 million, but operating cash flow contributed only $48 million of that. The rest came from spending $33 million less on regular equipment and $86 million less on "sustainability growth" projects (the recycling and RNG build-out, now mostly finished). Over nine months, free cash flow rose to $3.01 billion from $2.11 billion, and growth capital spending fell to $191 million from $429 million.
• Returns are running near free cash flow, and debt crept up. WM returned $957 million in the quarter ($580 million of buybacks, $377 million of dividends) and $2.72 billion over nine months, more than 90% of free cash flow. Total debt rose to $23.37 billion from $22.91 billion at year-end, and the portion due within a year rose to $1.52 billion from $711 million.
• Guidance language: revenue is now expected at the high end of the range, but that is helped by fuel surcharges; adjusted EBITDA is guided only "within" its range, not at the high end.

On balance the quarter is flattered: GAAP EPS rose 37.6% mainly because $218 million of last year's charges did not recur, while the underlying measure, adjusted EPS, grew 8.6%.

Did last time's read hold up?

Our Q2 2026 report said to watch three things in this quarter, and argued that WM's profit was growing about twice as fast as its underlying revenue on price and Stericycle savings.

• Commercial volume: no improvement. It fell 1.3%, against 1.2% in Q2.
• Healthcare Solutions volume: stabilized. Revenue rose 3.7% after falling 1.2% in Q2, but price and volume together added only $1 million.
• RNG pricing: weaker on credits ($2.32 versus $2.56 a year earlier), offset by higher volumes from new plants.
• Profit outgrowing revenue: this did not hold this quarter. Adjusted EBITDA grew 5.8%, slightly slower than revenue at 6.3%, because fuel and risk management costs ate the price-to-cost gain. One worry did ease: core price, which had slowed from 6.3% to 5.7% between Q1 and Q2, ticked back up to 5.8%.

Takeaway: Strip out last year's write-downs and WM grew earnings per share about 9%, roughly in line with revenue, not the 38% the GAAP line shows. The quarter shows the two halves of the business moving apart: the core trash business is pricing well but its margin shrank on fuel and risk management costs, while recycling, RNG and the Stericycle business supplied two-thirds of the profit growth.

Guidance and outlook

WM affirmed its 2026 guidance and said revenue should land at the high end of $26.275–26.475 billion, adjusted operating EBITDA within $8.15–8.25 billion, and free cash flow at the high end of $3.75–3.85 billion. It still expects about $2 billion of buybacks in 2026, of which $1.58 billion was done by September 30, leaving roughly $420 million for the fourth quarter.

Revenue moving to the top of the range while EBITDA stays mid-range implies a full-year adjusted EBITDA margin of roughly 30.8–31.2% at the top revenue figure, slightly lower than the 31.0–31.2% the Q2 guidance implied. The likely reason is the one visible in this quarter: fuel surcharges add revenue at little or no margin.

Our view: the pricing engine is intact (5.8% core price with volume down only 0.5%), and the newer businesses are now adding profit rather than consuming capital, which is why free cash flow is up more than 40% this year. The risks for 2027 are that the lower capital spending flattering free cash flow will not fall further, Stericycle cost savings will eventually be fully captured, and commercial volume, the part of WM's numbers most tied to business activity, has not turned. CEO Jim Fish retires on January 4, 2027, when President John Morris takes over (announced in August).

Things to watch in the fourth-quarter report and the 2027 outlook:

• Whether Collection and Disposal margins recover once fuel prices and risk management costs are lapped.
• Commercial volume, still falling at about 1.3%.
• The 2027 capital spending plan, which decides whether free cash flow can keep growing without the help of a shrinking build-out budget.