Although initial peace talks between the United States and Israel fell through, diplomats from both sides have continued engaging through back channels to organize a fresh round of negotiations. Buoyed by this positive backdrop, Canadian equity markets have maintained their upward momentum, with the S&P/TSX Composite Index gaining 3% since the start of last week and now sitting just 1.3% below its all-time high.c
Despite the broader market’s strong recovery, Waste Connections (TSX: WCN) has declined more than 20% from its 52-week high. Ongoing weakness in recycled commodity prices, lower renewable energy credits from landfill gas sales, softer solid waste volumes, and delays in reopening the Chiquita Canyon landfill have all weighed on investor sentiment, dragging the stock down.
With that in mind, let’s examine the company’s latest fourth-quarter results, growth outlook, and valuation to assess whether the recent pullback presents a buying opportunity.
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WCN’s fourth-quarter performance
WCN reported its fourth-quarter results in February, delivering 5% year-over-year revenue growth to US$2.4 billion. Contributions from acquisitions completed over the past four quarters, along with favourable pricing of 6.4%, more than offset weaker volumes and lower commodity prices, supporting the topline. During the year, the company completed 19 acquisitions, which collectively contributed US$58 million to fourth-quarter revenue. Meanwhile, total volumes declined 2.7%, reflecting intentional shedding, price-volume trade-offs, and continued softness in more cyclical segments of the business.
Backed by this revenue growth and solid execution amid improving operating trends, adjusted EBITDA rose 8.7% year over year to US$796 million. The adjusted EBITDA margin also expanded by 110 basis points to 33.5%, driven by cost efficiencies, higher productivity, and improved customer service. Lower employee turnover – reaching a three-year low – further supported margin expansion.
Additionally, adjusted earnings per share (EPS) came in at US$1.29, up 11.2% from the prior-year quarter. Having discussed its fourth-quarter performance, let’s now turn to the company’s growth outlook.
WCN’s growth prospects
Given the essential nature of its services, WCN continues to expand its business through a mix of organic growth and strategic acquisitions. The company currently operates five renewable natural gas (RNG) facilities and is expanding its footprint, with plans to bring additional facilities online later this year. It is also developing a state-of-the-art recycling facility, which the company projects to become operational next year.
Supported by robust cash flows and a strong balance sheet, WCN intends to maintain an active acquisition strategy. It has built a solid pipeline of potential deals involving several private companies that could collectively contribute around $5 billion in annual revenue.
Alongside these growth initiatives, the waste solutions provider is investing in AI-driven solutions to enhance efficiency and productivity. By further digitizing and automating its operations and leveraging advanced data analytics for improved forecasting, WCN aims to enhance overall performance. Its dynamic routing platform is improving asset utilization, while stronger employee engagement and enhanced safety metrics have reduced voluntary turnover and boosted customer satisfaction and retention. Together, these efforts could lower operating costs and support ongoing margin expansion.
Considering these factors, WCN appears well-positioned for sustained long-term growth.
Investors’ takeaway
The recent pullback has brought WCN’s valuation to more attractive levels. Its next 12 months (NTM) price-to-sales and price-to-earnings multiples currently stand at 4.1 and 29.3, respectively. The company has also delivered double-digit dividend growth for 15 consecutive years and now offers a forward yield of 0.64%. Considering these factors, WCN appears to be a compelling buying opportunity at current levels.
