This Is Our Key Focus With Waste Management and Labcorp Earnings
We're prepping for results from these Pro Portfolio holdings and here's what we're looking for.
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In our comments on the Momentum AI event that spans Monday and Tuesday, we quickly mentioned that Waste Management WM will report after Monday's market close and holding its earnings call Tuesday morning. With Labcorp LH also reporting Tuesday morning let's walk through consensus expectations for both reports and share what TheStreet Pro Portfolio will be focusing on.
Waste Management
Wall Street expects Waste Management to deliver March-quarter EPS of $1.59 on revenue of $6.1 billion and guide its June quarter to EPS of $1.90 on $6.39 billion in revenue. Those revenue figures will benefit from the November 2024 closing of WM's Stericycle acquisition, which means the March quarter is the first one in which Stericycle is part of WM. From the jump, we liked that acquisition because it extends WM into the medical waste market and offers cross-selling opportunities and cost-saving synergies that the company's experienced acquisition integration management team can capitalize on.
Examining the core Waste Management business, we’ll be interested in pricing comments for 2025 and the impact on margins. We’ll also be interested in the company’s progress in deploying automated trucks and whether its disciplined approach led it to walk away from any additional low-margin contracts.
There is the possibility that the management team may not say all that much Tuesday morning on its earnings call. We’ve seen other companies be tight-lipped on their earnings call when they have an upcoming Investor Day, Analyst Day, or Capital Markets Day. In the case of Waste Management, it will hold its 2025 Investor Day on June 24. Following the recently increased dividend and the post-Stericycle suspension of its repurchase program, we suspect that event will be focused on the integration of Stericycle and where the consolidated business can go in the next few years.
When we added WM shares to the Pro Portfolio, we outlined why we liked the inelastic nature of the waste business and a management team that knows how to grind margin improvement out of big and small acquisitions. We look forward to hearing some of that Tuesday and much more in late June. Based on what we learn, we will revisit our current $245 price target for WM, but if the shares found their way back to the $215 level we would be interested buyers at those levels.
Labcorp
Consensus forecasts for Labcorp peg March-quarter EPS at $3.73, up modestly year over year, on revenue of $3.4 billion. Guidance for the current quarter is for EPS of $4.17 in a wide range between $3.95-$4.48 with revenue expected to be around $3.48 billion.
The story behind Labcorp is one of an expanding array of diagnostic tests, testing relationships with medical offices and hospitals, and footprint expansion. While results can be lumpy quarter to quarter, we see Labcorp benefiting from those factors as well as the aging domestic population and the subsequent tailwind for medical testing.
On the earnings call Tuesday, we’ll be looking to see the company reiterate its prior guidance that called for EPS of $15.60-$16.40 for this year with margins growing in both its Diagnostic and Biopharma segments. As part of that, we’ll be interested in management’s latest on the Invitae acquisition, which has been expected to become accretive in the second half of 2025.
We’ll also be curious about Labcorp’s comments on its M&A pipeline and related activity, and how that might be a tailwind or headwind for the 6.5%-7.7% 2025 revenue growth target for the Diagnostics business. As a reminder, the Diagnostics business drove 78% of overall revenue and operating income last year, with the balance from the Biopharma segment.
The Pro Portfolio has slowly built up its position size in this holding, and given the nature of its business, it stands relatively immune from tariff pressure. However, because companies like Labcorp and competitor Quest Diagnostics DGX have multi-year supplier contracts, we will be assessing the indirect hit from tariffs and what that could mean for Labcorp’s cost structure. Based on what we learn, we’ll fine-tune our $265 price target as needed.
At the time of publication, TheStreet Pro Portfolio was long WM and LH.
