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Waste Connections (TSE:WCN)
TSX:WCN
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Waste Connections
(TSX:WCN)
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Rating:64Neutral
Price Target:
C$234.00
▲(2.38% Upside)
Action:DowngradedDate:02/18/26
The score is driven mainly by solid underlying profitability and operating cash generation, plus constructive 2026 guidance for margins and free cash flow. These strengths are tempered by a weak technical setup (price below major moving averages), premium valuation (high P/E with low yield), and financial trajectory concerns from the 2025 revenue/FCF decline and rising leverage.
Positive Factors
Pricing power & margin expansion
Sustained above-trend core pricing and guided price-led organic growth support durable margin expansion. With long-term municipal and commercial contracts and limited local competition, pricing strength should continue to drive operating leverage and protect margins across multi-year cycles.
Stable operating cash generation
Consistent, sizable operating cash flow provides financial resilience: it funds capex, RNG/recycling investment, M&A, and shareholder returns. That strong cash base reduces dependence on external financing and underpins long-term strategic flexibility even through cyclical volume swings.
Disciplined M&A and capital returns
A repeatable acquisition program plus large cash returns indicate disciplined capital allocation. Bolt-on M&A expands local footprint and recurring revenue, while buybacks/dividends show management prioritizes shareholder value, reinforcing a durable growth-and-return model.
Negative Factors
Rising leverage trend
A multi-year rise in leverage reduces financial flexibility and increases vulnerability to cyclical slowdowns or higher rates. Elevated debt levels can constrain investment optionality, raise interest costs, and pressure covenant room if free cash flow weakens in tougher conditions.
Free cash flow volatility
A material FCF decline and only ~50% conversion of earnings to free cash flow highlight sensitivity to capex, working capital, and one-offs. That limits the company’s buffer for M&A, closures, or buybacks and raises execution risk if commodity values or volumes remain weak.
Chiquita Canyon closure & regulatory costs
Large, multi-year closure and ETLF costs and complex California regulation create ongoing cash demands and timing uncertainty. These structural regulatory and political headwinds can compress returns on assets in key markets and raise long-term execution and cost risk.
Waste Connections (WCN) vs. iShares MSCI Canada ETF (EWC)
Market Cap
$58.44B
Dividend Yield0.75%
Average Volume (3M)380.50K
Price to Earnings (P/E)41.9
Beta (1Y)0.31
Revenue Growth10.49%
EPS Growth-32.11%
CountryCA
Employees23,854
SectorIndustrials
Sector Strength72
IndustryWaste Management
Share Statistics
EPS (TTM)1.75
Shares Outstanding255,681,230
10 Day Avg. Volume406,448
30 Day Avg. Volume380,496
Financial Highlights & Ratios
PEG Ratio0.56
Price to Book (P/B)5.47
Price to Sales (P/S)4.76
P/FCF Ratio36.98
Enterprise Value/Market Cap0.89
Enterprise Value/Revenue5.48
Enterprise Value/Gross Profit12.94
Enterprise Value/Ebitda17.40
Forecast
1Y Price Target
$272.64Price Target Upside19.29% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering20
EPS Forecast (FY)7.44
Revenue Forecast (FY)$13.54B
Waste Connections Business Overview & Revenue Model
Company DescriptionWaste Connections, Inc. provides non-hazardous waste collection, transfer, disposal, and resource recovery services in the United States and Canada. It offers collection services to residential, commercial, municipal, industrial, and exploration and production (E&P) customers; landfill disposal services; and recycling services for various recyclable materials, including compost, cardboard, mixed paper, plastic containers, glass bottles, and ferrous and aluminum metals. The company also owns and operates transfer stations that receive compact and/or load waste to be transported to landfills or treatment facilities through truck, rail, or barge; and intermodal services for the rail haul movement of cargo and solid waste containers in the Pacific Northwest through a network of intermodal facilities. In addition, it provides E&P waste treatment, recovery, and disposal services for waste resulting from oil and natural gas exploration and production activity, such as drilling fluids, drill cuttings, completion fluids, and flowback water; production wastes and produced water during a well's operating life; contaminated soils that require treatment during site reclamation; and substances, which require clean-up after a spill, reserve pit clean-up, or pipeline rupture. Further, the company offers leasing services to its customers. As of December 31, 2021, it owned 334 solid waste collection operations; 142 transfer stations; 61 municipal solid waste (MSW) landfills; 12 E&P waste landfills; 14 non-MSW landfills; 71 recycling operations; 4 intermodal operations; 23 E&P liquid waste injection wells; and 19 E&P waste treatment and oil recovery facilities. The company also operates an additional 53 transfer stations, 10 MSW landfills, and 2 intermodal operations. Waste Connections, Inc. was founded in 1997 and is based in Woodbridge, Canada.
How the Company Makes MoneyWaste Connections generates revenue primarily through its waste collection and disposal services, which account for the majority of its earnings. The company charges customers fees for collecting and transporting waste, as well as tipping fees for disposing of waste at its landfills. Key revenue streams include residential, commercial, industrial, and municipal waste services. Furthermore, Waste Connections enhances its earnings through recycling operations, where it processes recyclable materials for resale. The company also benefits from long-term contracts with municipalities, which provide stable revenue streams. Strategic acquisitions of smaller waste management companies allow Waste Connections to expand its service footprint and customer base, contributing further to its financial performance.
Waste Connections Earnings Call Summary
Earnings Call Date:Feb 11, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 29, 2026
Earnings Call Sentiment Positive
The call highlights strong underlying operating performance: robust pricing, margin expansion (Q4 margin +110 bps, full-year margin 33%), solid adjusted EBITDA and free cash flow generation, disciplined M&A, meaningful shareholder returns, and tangible operational wins (safety, lower turnover, driver academies). These positives are partially offset by material one-off and ongoing headwinds — notably the Chiquita Canyon closure costs (~$200M in 2025; $100–150M expected in 2026), multiyear lows in recycled commodity values (20–30 bps margin drag baked into 2026), slower C&D/roll-off volumes, and RNG ramp/timing risks and lower RINs. Overall, the company presents a constructive outlook with margin and free cash flow expansion guided for 2026 and clear paths to additional upside (commodity recovery, M&A, RNG ramp, AI-driven efficiencies); the strength of the highlights outweighs the manageable but meaningful lowlights.Q4-2025 Updates
Positive Updates
Adjusted EBITDA Growth and Margin Expansion
Q4 adjusted EBITDA of $796,000,000, up 8.7% year-over-year and 33.5% of revenue (Q4 margin +110 bps YoY). Full-year 2025 adjusted EBITDA of $3,125,000,000, up 7.7% YoY, with an industry-leading full-year adjusted EBITDA margin of 33% (reported +50 bps YoY; normalized >33.6%). 2026 guidance calls for adjusted EBITDA of $3,300,000,000–$3,325,000,000 and margin of 33.3%–33.4% (up 30–40 bps YoY).
Strong Pricing and Solid Waste Performance
Core solid waste pricing of 6.5% for full-year 2025 (Q4 pricing 6.4%), which exceeded original expectations and drove an outsized price-cost spread. 2026 organic solid waste growth guidance of 3.5%–4% with core pricing of 5%–5.5% and an expected yield of ~4% (implying volumes flat to down ~0.5%).
Robust Free Cash Flow and Shareholder Returns
2025 adjusted free cash flow of $1,260,000,000 (~50% conversion of adjusted EBITDA). Returned over $830,000,000 to shareholders in 2025 through dividends (> $330,000,000) and share repurchases (> $500,000,000); quarterly dividend per share increased by 11.1%.
Disciplined Acquisitions and Balance Sheet Strength
Closed roughly $330,000,000 of acquired annualized revenue in 2025 (19 acquisitions); full-year net acquisition contribution $377,000,000. 2026 rollover contribution expected around $125,000,000. Debt-to-EBITDA leverage of ~2.75x, enabling continued M&A and capital returns.
Operational Improvements — Safety, Retention and Labor Initiatives
Multiyear lows in employee turnover and safety incident rates; voluntary employee turnover met the 2025 target of 10%. Safety-related incidents down almost 20% YoY in January. Driver academy program: ~35% of new driver hires trained in 2025 with retention roughly double non-academy hires; forecast >60% of driver hires to be academy-trained in 2026.
Sustainability and Technology Investments
Progress on RNG and recycling: five RNG facilities online with remainder expected by year-end; aggregate RNG/recycling CapEx in 2026 ~ $100,000,000. Company expects RNG run-rate EBITDA in the ~$100,000,000–$120,000,000 range when fully ramped (targeting 2027). Multiyear AI rollout underway (dynamic real-time routing, mobile customer engagement) aimed at efficiency, safety and customer-service improvements with paybacks in months to ~1.5 years.
Negative Updates
Recycled Commodity Headwinds
Recycled commodity values at multiyear lows reduced reported margins in 2025. Commodities revenue is approximately $250,000,000; management baked in a 15% year-over-year decline for 2026, equating to an approximate 20–30 basis-point drag on adjusted EBITDA margin (heaviest impact expected in H1 2026).
Chiquita Canyon Closure and ETLF Costs and Regulatory Complexity
Chiquita Canyon closure and elevated temperature landfill (ETLF) management generated approximately $200,000,000 of cash flow impact in 2025. 2026 closure-related outlays are expected to be $100,000,000–$150,000,000. The company cites significant regulatory and political challenges in California that have increased costs and timing uncertainty (seeking EPA engagement to streamline oversight).
Volume Weakness in Cyclical Segments
Reported volumes down 2.7% in Q4. Q4 same-store metrics: roll-off pulls down 2%; total landfill tons up 3% (MSW +4%, special waste +4%, but construction & demolition (C&D) down 4%). Full-year C&D tons down 5% (about 15% below 2023 levels), reflecting ongoing weakness in cyclically exposed end markets and contributing to flat-to-slightly negative volume guidance for 2026.
RNG Ramp Timing and RIN Price Pressure
RNG projects are subject to permitting and interconnect timing; plant ramp-ups can take months to over a year to reach full efficiency (initial efficiencies 40–50%). RIN values have fallen from highs (~$3.40) to roughly ~$2.40, reducing near-term RNG economics versus earlier expectations and tempering near-term EBITDA contribution despite attractive long-term returns.
Near-term Headwinds and Tough Comparisons
Management flagged tougher year-over-year comparisons in early 2026 for recycled commodities and noted seasonal/weather effects (recent outsized weather events impacting Q1). Guidance does not assume macro improvement, so any slower-than-expected recovery in volumes or commodities would weigh on results.
Company Guidance
The company guided 2026 revenue of $9.90–9.95 billion and adjusted EBITDA of $3.30–3.325 billion (adjusted EBITDA margin 33.3%–33.4%, +30–40 bps year-over-year, with a 20–30 bp commodity drag), assuming no macro improvement; solid waste organic growth of 3.5%–4% driven by core pricing of 5%–5.5% (yield ~4%, implying volumes roughly flat to down ~0.5%), acquisition contribution of about $125 million, and E&P flattish; adjusted free cash flow is expected to rise double digits to $1.40–1.45 billion (2025 was $1.26 billion, ~50% EBITDA conversion), with 2026 CapEx of ~$1.25 billion (including ~$100 million for RNG/recycling) and $100–150 million of Chiquita closure-related outlays factored into free cash flow (normalizing for non-core items implies ~50% conversion or ~ $1.7 billion); other structural items include D&A ~13.1% of revenue (intangibles amortization ~$195 million, ~$0.57/sh net of tax), interest expense ~ $330 million, and an effective tax rate of ~24.5%, with leverage around 2.75x and acquisition/commodity upside serving as potential sources of outperformance.Waste Connections Financial Statement Overview
Summary
Profitability and operating cash generation are strong (healthy gross margin and improved 2025 EBIT margin; operating cash flow grew to ~$2.4B). Offsetting this, 2025 revenue declined (-10.7%), free cash flow fell sharply (-39.9%), and leverage has risen over time (debt-to-equity ~1.11), raising balance-sheet risk if conditions soften.Income Statement
Revenue expanded steadily from 2020–2024, but 2025 shows a notable revenue decline (-10.7%), which is a clear near-term concern. Profitability is generally strong for the group: gross margin improved over time and remained healthy (~42% in 2025), and 2025 posted meaningfully higher operating profitability (EBIT margin ~18.5% vs. ~12.2% in 2024) with net margin rebounding to ~11.4%. The main weakness is the volatility in growth and margins across years, culminating in the 2025 top-line contraction despite improved earnings.74
Positive
Balance Sheet
The company has built a larger asset base over time, but leverage has crept up: debt-to-equity rose from ~0.71 (2020) to ~1.11 (2025), indicating increased reliance on debt funding. Equity has also increased (supporting balance sheet capacity), yet the current leverage level is a moderate risk factor if operating conditions soften. Overall, the balance sheet looks workable, but the trend toward higher leverage is the key drawback.63
Positive
Cash Flow
Operating cash generation is solid and improving in absolute dollars (about $1.4B in 2020 to ~$2.4B in 2025), supporting business resilience. However, free cash flow weakened in 2025 with a sharp decline (-39.9%), and free cash flow runs at roughly half of net income in recent years (about 0.51 in 2025), suggesting heavier reinvestment needs or working-capital/capex pressure. Strength is consistent operating cash flow; weakness is the recent free-cash-flow drop and only moderate cash conversion vs. earnings.70
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 9.47B | 8.92B | 8.02B | 7.21B | 6.15B |
| Gross Profit | 4.01B | 3.73B | 3.28B | 2.88B | 2.50B |
| EBITDA | 2.98B | 2.25B | 2.26B | 2.17B | 1.75B |
| Net Income | 1.08B | 617.57M | 762.80M | 835.66M | 618.05M |
Balance Sheet | |||||
| Total Assets | 21.13B | 19.82B | 17.92B | 17.13B | 14.70B |
| Cash, Cash Equivalents and Short-Term Investments | 45.97M | 62.37M | 78.40M | 78.64M | 147.44M |
| Total Debt | 9.13B | 8.39B | 7.02B | 7.10B | 5.21B |
| Total Liabilities | 12.88B | 11.96B | 10.22B | 10.02B | 7.71B |
| Stockholders Equity | 8.25B | 7.86B | 7.69B | 7.11B | 6.99B |
Cash Flow | |||||
| Free Cash Flow | 1.22B | 1.17B | 1.19B | 1.11B | 953.91M |
| Operating Cash Flow | 2.41B | 2.23B | 2.13B | 2.02B | 1.70B |
| Investing Cash Flow | -2.02B | -3.16B | -1.58B | -3.09B | -1.69B |
| Financing Cash Flow | -360.04M | 944.95M | -544.40M | 1.03B | -499.50M |
Waste Connections Technical Analysis
Neutral
228.56
Price Trends
229.68
Negative
234.95
Negative
242.64
Negative
Market Momentum
-0.13
Positive
48.87
Neutral
33.19
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:WCN, the sentiment is Neutral. The current price of 228.56 is above the 20-day moving average (MA) of 228.14, below the 50-day MA of 229.68, and below the 200-day MA of 242.64, indicating a neutral trend. The MACD of -0.13 indicates Positive momentum. The RSI at 48.87 is Neutral, neither overbought nor oversold. The STOCH value of 33.19 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSE:WCN.
Waste Connections Risk Analysis
Waste Connections disclosed 38 risk factors in its most recent earnings report. Waste Connections reported the most risks in the "Production" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 1 New Risks
1.
Our inability to adapt to and manage the benefits and risks of Artificial Intelligence (AI) could expose us to liability or put us at a disadvantage. Q4, 2025
Waste Connections Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
67 Neutral | $21.12B | 5.68 | -21.15% | 0.14% | -10.87% | -168.62% | |
64 Neutral | $58.44B | 41.90 | 13.22% | 0.75% | 10.49% | -32.11% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
59 Neutral | C$4.38B | 31.34 | 11.37% | 2.27% | -1.47% | -79.68% | |
54 Neutral | C$387.87M | 51.19 | 36.36% | ― | 28.43% | 80.34% | |
44 Neutral | C$57.32M | -243.45 | -3.01% | ― | 63.49% | -133.70% |
* Industrials Sector Average
TSE:WCN
Waste Connections
228.56
-37.72
-14.17%
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.