Waste will be collected even in a recession. These companies will profit from it
Waste collection is one of the expenses that households, businesses, and municipalities do not cut even in a recession. The largest North American landfill and collection network operators therefore continue to raise prices by more than 5% annually, even though volumes are falling, and convert roughly 45% of operating profit into free cash. However, the market demands a premium for this resilience, which narrows the room for future returns and leaves only a small margin for error.
Key points
Prices carry all the growth: in Q2 2026, the largest operators raised base prices by 5.3 to 5.7%, even though waste volumes fell by 1.6 to 1.9%.
The 2009 recession as a resilience test: volumes then fell by 8 to 10%, yet companies pushed through price increases of around 3%, and their free cash flow declined by only about a tenth.
Households sustain revenue, construction weakens it: residential and commercial collection fell by only 0.5 to 1.3% in 2009, whereas industrial and construction waste reacts immediately to an economic slowdown.
Cash covers profits: the industry converts roughly 43 to 46% of EBITDA into free cash flow, even though it invests 10 to 12.5% of revenue annually in vehicle fleets and landfills.
Quality is already priced in: free cash yield ranges only between 3.6 and 4.4%, so even a modest slowdown in price increases or a decline in valuations can push a three-year shareholder return to zero.
Why waste resists recession, but not entirely
The economics of the industry rest on a simple asymmetry. A household can postpone buying a car, but it cannot stop taking out the trash. A municipality cannot stop collection, a hospital cannot accumulate medical waste, and a supermarket cannot leave packaging on the loading dock. Demand for the basic service is therefore barely sensitive to price or the economic cycle. A large part of revenue also comes from multi-year municipal contracts and recurring subscriptions from commercial customers, so the company knows most of its future revenue in advance.
The second pillar is market structure. A landfill requires a permit that takes years to obtain and often faces local opposition. Whoever owns a landfill in a region controls the final stage of the entire chain, and competitors pay them for waste disposal. The density of collection routes then creates economies of scale: a truck that serves fifty customers on one street is significantly more profitable than a truck that drives miles between them.
Where recession hurts
Resilience is not uniform. Residential collection is almost immune, commercial collection reacts mildly, because closed restaurants and offices cancel or reduce containers. The most sensitive is industrial and construction waste, i.e., large-volume roll-off containers and so-called special waste from demolitions and remediation. It is paid per individual haul and disappears immediately when construction slows. A recession also depresses prices of recycled raw materials and energy from landfill gas, which directly reduces revenue and margins of recycling divisions.
The best empirical test is offered by the 2008–2009 crisis. Waste Management in Q2 2009 reported an 8.6% decline in volume-related revenue, but commercial revenue excluding fuel surcharges fell only 1.3% and residential 0.5%. Most of the revenue decline then came from lower commodity prices and fuel surcharges, not customer losses. WM's free cash flow reached $1.47 billion in 2008, and management expected at least $1.3 billion for 2009. Republic Services lost 9.5% of volumes in full-year 2009, yet still pushed through a 3.0% base price increase.
The case of Waste Connections is even more instructive. According to its 2009 annual report, the company lost almost 11% of revenue year-over-year due to lower volumes, yet total revenue grew 13.5% to $1.19 billion thanks to acquisitions, including assets divested by Republic after its merger with Allied Waste. Aggregate numbers can thus mask organic decline in a recession, and an investor must always separate price, volume, and acquisitions.
Inflation as friend and foe
The main costs are wages for drivers and mechanics, fuel, fleet maintenance, and provisions for landfill closure and post-closure care. Companies defend against inflation with two mechanisms: fuel surcharges that pass diesel prices to customers with a short delay, and contract indexation. The weakness is long-term municipal contracts tied to the consumer price index with a one-year lag. When costs spike suddenly, margins temporarily narrow, as 2022 showed. The same mechanism works in reverse and helps margins when costs slow faster than indexed prices.
Waste Management
The largest landfill network in North America
WM is the largest market player with expected revenue of $26.28 to $26.48 billion for 2026. By its own account, it operates the largest landfill network and collection fleet in North America and is also the largest recycler. The core remains the Collection and Disposal segment, which generated $5.08 billion of the total $6.23 billion revenue in Q1 2026 and achieved an adjusted operating EBITDA margin of 38.5%. The rest consists of recycling, renewable energy from landfill biogas, and since 2024 also medical waste following the acquisition of Stericycle, now reported as the Healthcare Solutions segment.
WM's competitive advantage is best captured by the internalization metric. In Q1 2026, 71.7% of the waste the company collected ended up in its own landfills. It thus does not pay competitors for disposal margin but collects it itself, and it also controls capacity that other collection companies in the region need.
Prices rise, volumes are deliberately cleaned
In Q2 2026, revenue grew 4.0% with a 5.7% increase in base price and a 3.6% increase in yield (average price after customer mix adjustments). Volumes fell 1.8%, or only 0.4% after adjusting for extraordinary cleanup from the previous year's fires. Part of the decline is intentional: WM is shedding less profitable residential contracts. Management lowered its full-year revenue outlook by about 0.6% due to lower volumes, but kept its adjusted operating EBITDA outlook at $8.15 to $8.25 billion. The company thus shows it can protect profit even with weaker volumes.
Cash after the investment wave
For investors, the most important development at WM is the inflection in capital expenditures. After years of investment in biogas plants, automation of sorting facilities, and Stericycle integration, spending is now falling and cash is growing. Free cash flow reached $920 million in Q1 2026 versus $475 million a year earlier, and $1.10 billion in Q2 versus $818 million. Full-year 2026 guidance calls for $3.75 to $3.85 billion. The company pays a dividend of $3.78 per share annually, up 14.5% from 2025, and plans to repurchase about $2 billion of stock this year. Leverage returned to the target range of 2.5 to 3.0 times EBITDA in Q1.
The risk is diversification itself. Medical waste and renewable energy have lower margins and higher sensitivity to commodity prices. In Q1 2026, the Healthcare Solutions segment achieved an adjusted EBITDA margin of 17.3%, less than half the core margin. The long-term WM thesis therefore depends on whether Stericycle margins can be further improved.