Waste management company Waste Connections (NYSE: WCN) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 7.1% year on year to $2.41 billion. Its GAAP profit of $1.12 per share was 1.1% below analysts’ consensus estimates.

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"Continued improvement in employee retention and record low safety rates, along with solid waste core pricing growth of 6.6%, drove underlying solid waste margin expansion of approximately 70 basis points in the period," said Ronald J. Mittelstaedt, President and Chief Executive Officer.

Company Overview

Operating a network of municipal solid waste landfills in the U.S. and Canada, Waste Connections (NYSE: WCN) is North America's third-largest waste management company providing collection, disposal, and recycling services.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Waste Connections’s 11.2% annualized revenue growth over the last five years was impressive. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Waste Connections’s annualized revenue growth of 9.7% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Waste Connections reported year-on-year revenue growth of 7.1%, and its $2.41 billion of revenue exceeded Wall Street’s estimates by 0.7%.

Looking ahead, sell-side analysts expect revenue to grow 6.4% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.

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Operating Margin

Waste Connections has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 15.5%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Waste Connections’s operating margin decreased by 4.1 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q2, Waste Connections generated an operating margin profit margin of 19.1%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Waste Connections’s EPS grew at an astounding 26% compounded annual growth rate over the last five years, higher than its 11.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Waste Connections’s earnings can give us a better understanding of its performance. A five-year view shows that Waste Connections has repurchased its stock, shrinking its share count by 1.5%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Waste Connections, its two-year annual EPS declines of 12.6% mark a reversal from its (seemingly) healthy five-year trend. We hope Waste Connections can return to earnings growth in the future.

In Q2, Waste Connections reported EPS at $1.12, up from $1.07 in the same quarter last year. Despite growing year on year, this print slightly missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Waste Connections’s full-year EPS of $2.48 to grow 106%.

Key Takeaways from Waste Connections’s Q2 Results

It was good to see Waste Connections narrowly top analysts’ revenue expectations this quarter. On the other hand, its EBITDA and EPS fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 2.1% to $180.40 immediately following the results.

Waste Connections underperformed this quarter, but does that create an opportunity to invest right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.