WM's Underperformance: The Market is Waiting for a Guidance Reset

The market is sending a clear signal: Waste Management's story is not fully priced in. While the company's recent quarterly results and sector strength suggest a solid setup, the stock's performance tells a different tale. WM's shares fell , lagging behind the broader market's decline. Over the past month, , . Yet, zooming out, the disconnect becomes stark. Over the past year, WM's stock has returned just , .

This is the core puzzle. The stock is stuck in a rut while fundamentals and sector momentum point higher. The market's skepticism is understandable. After a year of lagging, investors are waiting for a reset-a tangible bridge from the current narrative to the future. The high bar set by the , which promised significant growth, has created an expectation gap. The market has been underwhelmed by the integration pace and the stock's muted reaction to strong quarterly beats. Now, with earnings due in late January, the pressure is on to close that gap. The whisper number for the upcoming report is already high, and any guidance that doesn't clearly signal a faster ramp-up from the acquisition will likely be met with a "sell the news" reaction.

The Whisper Number vs. The Print: What's Priced In

The upcoming earnings report is a pure test of expectations. The market has already priced in a successful integration and a clear path to margin expansion from the higher-margin healthcare unit. That confidence is reflected in a premium valuation, with Waste Management trading at a . For context, that forward multiple implies the stock is paying up for flawless execution on the Stericycle acquisition.

The consensus for the quarter itself is high, but not yet demanding. Analysts expect , , , . The real pressure point, however, is the full-year 2026 outlook. . Any guidance that merely matches this figure will likely be seen as a reset, not a raise.

The risk is that the print meets the whisper number but fails to close the expectation gap. The healthcare unit's integration has been a source of friction, with WM Healthcare Solutions tracking below initial expectations. If the Q4 results show the core business holding steady but the healthcare segment's challenges persist, the stock could fall despite a beat. The market has been waiting for a catalyst that translates headlines into profits. For now, the high P/E ratio shows it's willing to pay for that promise. The earnings call will determine if the promise is still credible.

The Stericycle Overhang: Integration Friction vs. Market Priced Optimism

The market's high expectations for Waste Management are now squarely on the Stericycle integration. The deal, closed in November 2024, is the company's key growth driver, promising a foothold in higher-margin healthcare services. Yet, as the company moves into its second full year of ownership, the operational friction has become a tangible headwind. The healthcare unit, WM Healthcare Solutions, is tracking below initial expectations, with management citing deferred pricing actions, customer credits, and ERP-related challenges as key reasons. This is the swing factor: the promised growth is being offset by near-term execution costs.

Analysts have initiated coverage with a consensus price target of , a figure that implies continued growth from the combined entity. That target, along with the broader "Moderate Buy" rating, shows the market is still betting on a successful long-term integration. However, the setup is fragile. The stock's premium valuation, , prices in flawless execution. Any stumble in the healthcare unit's ramp-up could force a reassessment.

The critical risk is a guidance reset. The upcoming earnings call is the next test. If management provides commentary that signals the integration costs are higher or the timeline longer than anticipated, it would confirm the expectation gap is widening. The market has already seen a similar dynamic, where strong core business results were overshadowed by the healthcare unit's miss. A repeat, especially if it comes with a cautious forward view, could trigger a classic "sell the news" reaction. The high price target is a bet on the future; the integration friction is the present reality that must be bridged.

Catalysts and Risks: The Path to a Guidance Reset

The setup for Waste Management is now a classic expectation game. The stock's consolidation suggests the market is waiting for a catalyst to break the stalemate. The near-term tailwind is clear: a , set to begin in the first quarter of 2026, will provide a direct return of capital. This is the next potential catalyst, . For investors, it's a signal that the core business is generating ample cash, even as the healthcare unit faces friction.

Yet, this positive tailwind is entirely contingent on the primary execution risk: the Stericycle integration. The healthcare unit remains the swing factor, with WM Healthcare Solutions tracking below initial expectations. If the integration delays the expected margin accretion and cash flow benefits, it could undermine the very free cash flow that funds the buyback and dividend. The risk is a guidance reset that confirms the integration is costlier and slower than hoped, turning a potential catalyst into a headwind.

The critical event that will determine the path forward is the upcoming earnings report on , . The market has already priced in a successful integration and a clear growth trajectory. The results and, more importantly, the forward guidance will either confirm the "buy the rumor" thesis or force a "sell the news" reaction. A beat on the whisper number for the quarter, coupled with a raised full-year outlook, could reignite the rally. But if the healthcare unit's challenges persist and guidance merely matches the current consensus, the stock may struggle to break above its recent consolidation range. The high bar set by the premium valuation means there is little room for error.