Waste Management (NYSE: WM) reported Q4 EPS of $1.26, in-line with the analyst estimate of $1.26. Revenue for the quarter came in at $4.68 billion versus the consensus estimate of $4.62 billion.

2022 OUTLOOK:

• Revenue Growth
• Total Company revenue growth is expected to be 5.8% to 6.2%, which includes organic revenue growth from the collection and disposal business of approximately 6%. The Company’s disciplined pricing programs are expected to result in core price of more than 5.5%, yield approaching 4%, and volume of approximately 2%.
• Market prices for recycling commodities are expected to average $125 per ton in 2022, an approximate increase of 10% from the average rate the Company realized in 2021.
• The Company estimates that the value of renewable fuel standard credits in its renewable energy business will be approximately $3.00, which is similar to 2021.
• Profitability
• Adjusted operating EBITDA is expected to be in the range of $5.325 to $5.425 billion for the full year.(a)
• WM expects adjusted operating EBITDA margin to expand in the second half of 2022 as pricing activities progress in offsetting cost inflation and the Company achieves operating efficiencies through the application of technology.
• Free Cash Flow & Capital Allocation
• WM expects to spend in the range of $1.95 to $2.05 billion on capital expenditures to support its normal business activities.
• Additionally, the Company intends to spend an incremental $550 million for capital expenditures on high-return growth projects in the recycling and renewable energy lines of business. These investments advance the Company’s focus on increasing the renewable energy generated from its landfill network, automating recycling processing to reduce costs and improve product quality, and expanding its leadership in single-stream recycling across North America.
• Free cash flow excluding the acceleration of these targeted sustainability and automation focused capital investments is projected to be between $2.6 and $2.7 billion. Free cash flow is projected to be between $2.05 billion and $2.15 billion.(a)
• The Board of Directors has indicated its intention to increase the annual dividend by $0.30 per share to $2.60, increasing estimated annual dividends paid to shareholders to $1.08 billion. This will be the 19th consecutive year of increases in the Company’s per share dividend. The Board of Directors must separately approve and declare each dividend.
• In December 2021, the Board of Directors refreshed the Company’s share repurchase authorization, allowing for the repurchase of up to $1.5 billion of the Company’s common stock, signaling confidence in the Company’s cash flow outlook and financial position.
• STRATEGIC GROWTH & SUSTAINABILITY INVESTMENTS
• Renewable Energy
• As part of WM’s portfolio of landfill gas-to-energy projects, it operates four renewable natural gas (RNG) plants and expects two additional plants to come into service during 2022. Collectively, these facilities are expected to generate 3.6 million MMBtu in 2022.
• The Company plans to invest growth capital of approximately $275 million in 2022 and an incremental $550 million from 2023 to 2025 to expand its network of RNG plants. By 2026, the Company expects all of these investments to be operational, bringing the owned asset network to 21 RNG facilities that will generate a total of 24 million MMBtu per year.
• In the near term, the incremental operating cash flow growth from the Company’s new projects is expected to be more than offset by the incremental growth capital investment. In 2026, the Company expects that the incremental annual run-rate operating EBITDA of more than $400 million will flow through to free cash flow as growth.
• These capital investments are projected to have strong returns and payback periods of approximately three years based on a conservative estimate of $2.00 RINs prices and $2.50 per MMBtu natural gas prices.
• Recycling
• WM has successfully used technology to substantially automate sorting at four materials recovery facilities across our network of 49 single-stream facilities in North America. These investments have reduced the operating costs of recycling services, improved the quality of delivered product, and increased the amount of material ultimately recycled.
• The Company plans to invest growth capital of approximately $275 million in 2022 and an incremental $525 million from 2023 to 2025 to accelerate our investment in technology automation in a number of our single-stream facilities and to expand our recycling footprint including in under-served markets.
• These capital investments are projected to have strong returns and payback periods of approximately six years based on a blended average recycling commodity price of $125 per ton. In the near term, the incremental operating cash flow growth from the Company’s new and enhanced projects is expected to be more than offset by the incremental growth capital investment. By 2026, the Company expects the planned automation benefits and market expansion to generate incremental annual run-rate operating EBITDA of approximately $180 million, which will flow through to free cash flow as growth.
• Through the investments that focus on automation through accelerated technology deployments the Company expects total labor savings of approximately $60 to $70 million, which is one of the primary contributors to the expected incremental operating EBITDA growth by 2026.

For earnings history and earnings-related data on Waste Management (WM) click here.