WM Reports Q3 With Short Interest Easing After Pre-Earnings Peak

Waste Management collects trash for roughly half of America, and it reports third-quarter results today against a backdrop where the short position built ahead of the print has already begun to unwind.

Short interest peaked at just under 7.9 million shares in mid-October, roughly double the late-September level and the highest reading for the stock in over a year. Since then it has retreated. The latest estimate puts shares short at 7.5 million, equal to 1.85% of free float, down about 6% from the recent high. The lending market offers no signal of stress: availability is essentially unlimited, with more than 332 million shares available to borrow against the roughly 7.5 million currently lent out, and borrowing costs at 0.43% are low. Options positioning reads similarly relaxed. The put/call ratio at 0.54 is below its 20-day average of 0.58 and more than one standard deviation on the bullish side of normal. The short build that defined positioning a week ago looks to have been a pre-results hedge that is already coming off.

The analyst debate centres less on whether the business works and more on what growth rate the stock deserves at current prices. Morgan Stanley and JP Morgan both trimmed targets in early-to-mid October, with Morgan Stanley moving to $220 and JP Morgan to $235, both while holding their ratings. The mean target across the street sits at $253, about 7% above yesterday's close of $235.81. The bull case points to WM's plan to return roughly 90% of a targeted $3.8 billion in free cash flow to shareholders this year, along with pricing gains from the Stericycle integration. Bears note that sales growth in the first half ran below 5% and that recycled commodity prices created a roughly $14 million EBITDA headwind, with a large share of the expected 80 basis points of margin expansion coming from accounting reclassification rather than operational improvement. The stock trades at a forward P/E near 26 times and EV/EBITDA of 13.6 times, leaving limited cushion if the volume or pricing numbers disappoint.

WM's closest peer, RSG, gained 5.4% over the past week. WCN rose 12.7% and CWST added 11.1% over the same period. WM moved 1.8% higher on the week, lagging every name in the group. The gap is worth noting because it preceded today's print: capital appears to have rotated toward other waste names ahead of results rather than into WM directly. The only prior earnings reaction in the dataset showed the stock falling 5.5% on the day and 6.3% over the following week after the Q2 print in July, though a single data point carries limited weight.

Today's print will test whether WM's pricing momentum and free-cash-flow story can hold up against a backdrop of softer volume trends and a valuation that leaves the stock with less room for error than its sector peers.