We're Hiking This Price Target as Deal Synergies Start to Unfold
Here’s where we would contemplate upgrading this name, plus a lot more.
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We are boosting our price target on Waste Management WM to $245 from $230, reflecting expected continued top-line growth and margin expansion over the coming quarters. Those efforts should be fueled by continued adoption of technology and automation across WM’s core residential business, management’s focus on disciplined pricing, and initial synergies of $100 million this year as it integrates Stericycle. For the existing WM business that means business as usual, including robust cash generation, as the management team instills pricing discipline and focus on profitability.
Those acquisition synergies are expected to be more heavily weighted to the second half of 2025 and 2026, and a more meaningful update could come at WM’s June Investor Day. The bulk of synergies this year will be on the cost side of the equation with cross-selling and other revenue-related ones targeted for 2026. In full, WM targets $250 million in synergies by 2027. At the June Investor Day, we expect a more concrete roadmap for those cost synergies as well as revenue ones. As we get those details, we’ll revisit our new $245 target as needed.
With just over 10% upside to that target, there isn’t enough to justify a rating upgrade just yet. However, if WM shares pullback to the $211-$213 level, which has nice support given the tightness of the 100-day and 200-day moving averages, that could give us enough upside to reconsider an upgrade. And that’s before we factor in the company’s 2025 annual dividend of $3.30 per share, up from $3.00 last year.
United Rentals: Steady as She Goes Until Deal Closes
Little new was revealed on this morning’s earnings call from United Rentals URI, but the company did confirm that the 2025 revenue forecast of $15.6 billion-$16.1 billion does not factor any contribution from the pending H&E Equipment Services HEES acquisition. Per United's earnings press release that deal is slated to close later this quarter, which means a refresh to that guidance is coming in the next few months.
Until then, the next catalyst for us to watch will be quarterly results from other construction-related companies as well as next week’s December Construction Spending report. We continue to see the businesses at United Rentals and soon-to-be-acquired H&E benefiting from non-residential construction projects. Odds are we will maintain our $900 target for URI shares at least until we’re able to factor in cross-selling and other synergies once H&E is part of United Rentals.
At the time of publication, TheStreet Pro Portfolio was long WM and URI.
