During the October 6 episode of Mad Money, a caller asked whether Waste Management, Inc. (NYSE:WM) offered an opportunity to add to a long-term position around $200. Jim Cramer replied:
Okay, so I actually went through this exercise just yesterday. I said, “Oh man, look at this. It’s finally off the 202 schneid to go up to 207, 208. I bet you the thing’s breaking out.” Then I looked, and it’s got a double top… But I will tell you, at 25 times earnings with pretty decent growth and a good CEO, Jim Fish, I would put some on here. But remember, it was just a little bit lower. Don’t buy a full position. Put some on and then see if the market can take it down a little more.
Cramer was more hesitant when another caller questioned WM’s weakness in May. His earlier response on Waste Management identified what he wanted to investigate before recommending a purchase. WM has also announced that John Morris will succeed Jim Fish as CEO on January 4, 2027.
Cash Generation Improves as New Facilities Open
Waste Management, Inc. generated approximately $1.10 billion in second-quarter free cash flow, up 34.5% year over year. Revenue increased 4% to approximately $6.68 billion, while adjusted earnings per share rose to $2.02 from $1.92. Pricing and lower overhead expenses helped support the improvement. The company also completed three renewable natural gas facilities and a recycling facility during the quarter. Together, its recycling and renewable energy businesses increased adjusted operating EBITDA by 32.5%, benefiting from higher processing volumes, automation, and additional gas production. These investments are contributing to growth beyond the core collection business. WM also ranked ahead of Republic Services in a recent screen of metal-recycling stocks, although the ranking measured a different set of strengths from the valuation comparison below.
The valuation offers some support for Cramer’s interest. WM trades at approximately 24.6x forward earnings, compared with 28.4x for Republic Services. WM also carries a lower enterprise-value-to-EBITDA multiple, approximately 13.7x versus 15.3x. Both measures place it below this major industry peer, although that does not establish that the stock is inexpensive in absolute terms.
Collection Volumes Remain a Weak Spot
Collection and disposal volumes declined 1.8% in the quarter. Most of the decline was due to unusually strong wildfire cleanup activity a year earlier, but volumes still fell 0.4% after excluding that effect. Some residential losses resulted from deliberately exiting lower-margin business. Waste Management, Inc. also expects $2.4 billion – $2.5 billion of capital spending to support its existing business in 2026, plus approximately $250 million for sustainability growth investments. Maintaining cash generation while funding those requirements remains important to shareholder returns. Those spending requirements also feature in an earlier examination of WM’s competitive moat, which explored an unusual trade-off: the asset protecting its business is gradually consumed as it earns revenue.
Fund Ownership Edges Higher
Insider Monkey’s database showed 64 hedge funds holding WM in Q2, compared with 61 in Q1. Short interest stood at 1.45% of the float. Among those funds, Bill & Melinda Gates Foundation Trust was the largest shareholder with 26.72 million shares. The holder count increased modestly, while the short-interest figure indicates relatively limited outright bearish positioning.
Cramer’s recommendation was measured as he suggested beginning to add, but leaving room for a lower price. Stronger cash flow and a discount to Republic Services could help explain his interest. The softer collection volumes also give investors a reason to follow his advice on pacing rather than treating the recent share-price improvement as an all-clear.
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