Canadian equity markets have rebounded strongly from their March lows, with the S&P/TSX Composite Index gaining more than 8%. Improving investor sentiment—driven by easing geopolitical tensions and progress toward a ceasefire—has supported the broader market rally.
However, Waste Connections (TSX:WCN) has lagged this recovery and is currently trading more than 20% below its recent highs. Weak recycled commodity prices, lower landfill gas renewable energy credits, softer waste volumes, and delays in reopening the Chiquita Canyon landfill have weighed on the stock.
Against this backdrop, let’s examine the company’s business outlook, recent performance, growth prospects, and valuation to assess whether it presents an attractive buying opportunity.
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WCN’s business outlook
WCN provides collection, transfer, and disposal services for non-hazardous solid waste. The company primarily operates in secondary or exclusive markets, where it faces limited competition and benefits from stronger margins. Over time, it has expanded through a combination of organic growth and strategic acquisitions, completing more than 100 deals over the past five years and adding approximately US$2.3 billion to its annualized revenue.
In its recently reported first-quarter results, WCN generated revenue of US$2.37 billion, up 6.4% year over year. This growth was driven by contributions from acquisitions completed over the past four quarters, along with solid organic growth supported by favourable pricing and higher fuel and commodity prices. Despite the revenue increase, net income declined from US$241.5 million to US$219.3 million, mainly due to impairment charges resulting from adjustments to landfill closure and post-closure costs.
Excluding these one-time items, adjusted net income reached $314.9 million, or $1.23 per diluted share, with adjusted EPS (earnings per share) rising 8.8% year over year. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) also grew 8% to $769.5 million, while the adjusted EBITDA margin improved by 50 basis points to 32.5%. The company ended the quarter with cash and cash equivalents of $322.6 million, well-positioned to support ongoing growth initiatives.
Having reviewed its recent performance, let’s now turn to its growth outlook.
WCN’s growth prospects
WCN has started the year on a solid footing, and management expects this momentum to continue, supported by favourable commodity trends, steady growth in organic waste volumes, and ongoing acquisitions. After bringing six renewable natural gas (RNG) facilities into service, the company plans to add more later this year. It is also developing a state-of-the-art recycling facility, which could become operational next year.
With strong cash flows and a healthy balance sheet, WCN remains well-positioned to pursue its active acquisition strategy. The company has identified a robust pipeline of private acquisition targets representing approximately $5 billion in annualized revenue.
Operationally, margins continue to improve due to disciplined execution. Enhanced employee engagement and safety initiatives have reduced voluntary turnover to below 10%, thereby improving efficiency. Additionally, the company is expanding its use of artificial intelligence, which could further support margin expansion in the coming quarters.
Overall, WCN appears well-positioned for sustained long-term growth.
Investors’ takeaway
WCN has a strong track record of creating shareholder value. Over the past decade, the company has delivered a total return of 315%, reflecting an annualized gain of 15.3%. While its current dividend yield is relatively modest at 0.64%, it has consistently raised its payout at a healthy pace, delivering double-digit dividend increases for 15 consecutive years.
Following the recent pullback, the stock’s valuation has become more reasonable, with shares now trading at about four times forward sales and 28.6 times forward earnings. While these multiples may still appear elevated, the company’s solid fundamentals and clear growth visibility help justify the premium. As such, the recent correction could present an attractive entry point for investors with a three-year investment horizon.
