Waste Management’s Strategic Move to Reduce Volatility
The waste management industry is known for its cyclical nature, but Waste Management (WM) is taking steps to mitigate this risk. In a recent interview, WM CEO Jim Fish discussed the company’s acquisition of Stericycle, a medical and hazardous waste disposal company. This strategic move is expected to reduce WM’s exposure to market fluctuations and provide a natural hedge against the cyclical aspects of the business.
A Steady Stream of Revenue
Stericycle’s services are largely non-cyclical, with minimal seasonality, making it an attractive addition to WM’s portfolio. This acquisition will help flatten out the company’s revenue stream, providing a more stable source of income. Fish emphasized that WM’s core business still experiences some seasonality, but the Stericycle acquisition will help offset this variability.
Homebuilding Market Impact
The homebuilding market has historically been a significant contributor to WM’s business, but its share has decreased from 10% to less than half of that. While the industrial sector has been soft, Fish is optimistic about its prospects under the current administration, which he believes is pro-business. WM’s solid waste in landfills segment has performed well, and the company is focusing on areas that will drive growth.
Automation and Efficiency
WM is leveraging automation to improve efficiency and reduce labor costs. The company is replacing workers in certain roles, such as truck operators, with automated technology. This move is driven by necessity, as these jobs are becoming increasingly difficult to fill, with a 50% turnover rate. The average age of WM’s heavy equipment operators is approaching 53, making it challenging to find qualified replacements. Fish emphasized that WM is not laying off workers but rather using automation to replace them as they leave.
A Focus on Technology
WM’s use of automation is a strategic decision to stay ahead in a competitive market. By adopting new technologies, the company can reduce costs, improve efficiency, and increase productivity. Fish believes that this approach will help WM maintain its position as a leader in the waste management industry.
A Strong Earnings Report
WM’s recent earnings report impressed Wall Street, with shares rising over 6%. The company’s focus on strategic acquisitions, automation, and efficiency has positioned it for long-term success. As the waste management industry continues to evolve, WM is well-equipped to adapt and thrive.
Leave a Reply