‘We think the back half of 2021 will be good:’ Waste Management CEO

Yahoo Finance’s Alexis Christoforous and Jim Fish, Waste Management CEO, discuss the company’s latest earnings report and 2021 outlook.

Video Transcript

ALEXIS CHRISTOFOROUS: Welcome back. Shares of Waste Management under a little bit of pressure here today, despite news that the waste disposal company reported earnings and revenue ahead of analysts' expectations. The Houston, Texas-based company reporting fourth quarter earnings of $1.13 a share on revenue of more than $4 billion.

Joining me now is Waste Management CEO Jim Fish. And Jim, I know not only is the company based there, you live in Houston as well. Before we get into the company and their earnings report, just tell me how things are there for you and for your family.

JIM FISH: Well, I was listening to your previous guest. I mean, we've had quite a bit of damage at our house, actually. So it's been a little bit of a tough week for us, and without power for about 48 hours, without water for 48 hours. So I don't know who to point the finger at, but there certainly needs to be some questions asked here.

ALEXIS CHRISTOFOROUS: What about for the company's operations as well? Did you experience any interruptions there?

JIM FISH: Well, for the most part, our entire state was shut down operationally at Waste Management. We are fully up and running in Houston today, but Austin is just a kind of a skeleton operation, and the same for Dallas and Fort Worth.

ALEXIS CHRISTOFOROUS: It's interesting because the governor just said-- just before we came on air, had announced that the energy emergency was over, and the power grid was back up to normal. Are you experiencing that personally?

JIM FISH: I think that's right. At least personally, we're-- you know, we have power at our house, and our operations seem to have power. But-- and I suspect we'll be back up and running across the entire state tomorrow. But Houston is up today.

ALEXIS CHRISTOFOROUS: Right, no, I'm happy to hear that. All right, let's talk about these results, which came in better than expected during a very challenging time for many industries, including yours. Just talk to us about what drove that momentum for you last quarter and last year.

JIM FISH: Well, look, I thought our results were incredible. To actually, in 2020, have earnings, EBITDA numbers, that were within 1% of 2019, which was a record year for us, was amazing. And then to have strong guidance going into somewhat of an uncertain year in terms of the economy, we think the back half of '21 looks to be-- we think that'll be good. But the front half still has the code effect.

So I'm a little perplexed at how the stock continues to react not only for us, but for our entire sector, when this is really a reopening play. This entire industry is a reopening play. It's not getting priced like that, but I can't predict the stock price any better than I could predict the weather.

ALEXIS CHRISTOFOROUS: Yeah, I mean, I think that's a great point. There does seem to be this disconnect, right, between what the financials are showing and what the stock price is doing. What is it about Waste Management's story in particular that you think the investment community just isn't getting?

JIM FISH: Well, I don't know. I don't know what they're not getting because we had a pretty long call yesterday, and they were able to ask just about any question they wanted. I mean, when you look at Waste Management specifically, but also at the industry in general, we are a big reopening play. And a lot of our business has not reopened.

I mean, you know, you think about the industry being a trash and recycling industry and think, well, you haven't been shut down at all. But in our company specifically, 12% of our commercial business is schools. And schools, in many cases, have not reopened, and some states haven't reopened at all. And in some states, they're only partially reopened, whether it's universities or high schools or elementary schools.

Anything related to hospitality-- hotels are at 20% capacity versus a year ago. Sports teams, we pick up a big percentage of the NFL and Major League Baseball, NBA. Those haven't had fans for the most part. So the hospitality space, the educational space is all yet to reopen. Yet our industry is reporting these outstanding numbers. Waste Management reported outstanding numbers yesterday for 2020 and good guidance.

And I also think they might be missing the commodity piece of this. Commodities-- just about anything you read, it would tell you that commodities are going into a long-term uptrend. And the industry, and WM disproportionately so, has exposure or opportunity in the commodity space in our recycling business and our renewable natural gas business.

ALEXIS CHRISTOFOROUS: I know that you had to temporarily suspend price increases and certain fees for customers who were impacted by the pandemic in 2020. Has that spilled over into this year for you?

JIM FISH: A little bit, because as I said, some of our businesses haven't reopened, some of our customers haven't reopened. And it just doesn't seem morally right to go hit somebody with a price increase when they haven't been able to reopen their restaurant. So there's still a little bit of spillover. I suspect that will dissipate as the vaccine rolls out.

And we think that the economic reopening is largely tied to that vaccine. And everything you read about the vaccine is that the United States and Canada will probably be-- you know, the majority will be vaccinated by Q3 or Q4 of 2021. Therefore, you would expect small businesses, and big businesses as well, to be pretty fully reopened in the latter half of the year.

ALEXIS CHRISTOFOROUS: And I know that you recently closed your acquisition of the fellow waste disposal company, Advanced Disposal. What do you expect in terms of synergies there, and when might we start to see that happen, Jim?

JIM FISH: We've seen a little bit of that already on an annualized basis. We closed at kind of the first week of November. So annualized, or 2020 synergies, we got about $10 to $15 million there. And then we'll get another $50 to $60 million in synergies on top of that in 2021. The number we've given out as a whole, once we're fully through the integration, is north of $100 million. And we think we'll be somewhere well north of that. We're very confident in how ADS is rolling together. We love the fact that we have some new teammates that think about our business very similarly to our existing WM teammates.

ALEXIS CHRISTOFOROUS: With the time that we have left, I know a few weeks ago, you held your annual sustainability forum with lots of heavy hitters-- CEOs from PepsiCo and Walmart, Microsoft. Tell me-- give me one big takeaway from that forum when you had all these minds in one virtual room, if you will, talking about how to combat climate change.

JIM FISH: You know, I think what we found out-- and we knew it going in-- was that those three companies, among many, right, are very ESG focused. So whether it's Pepsi or Walmart or Microsoft, they're all very focused on ESG. And WM is as well. We think it's an opportunity for us to differentiate ourselves. We've focused very heavily-- I mean, the E components, the environmental component has been part of our business for a long time. And we're the biggest recycler in North America. We focused on producing renewable gas out of our landfills.

So what we-- I think the biggest takeaway for us, whether it was through the environmental piece or the social piece-- and I would tell you on the social side, we've not-- you know, we've been focused on that social aspect of our responsibilities since I took the CEO position, whether it's inclusion and diversity or whether it's taking care of our employees through COVID, through-- or enhanced benefits.

Whatever the case is, we've been very focused on ESG, just like those three companies that joined us for the sustainability forum. And I think the biggest takeaway is that maybe it was, for them, recognizing how focused WM has been with ESG. And maybe it ends up being a differentiator as we gain more business from those companies and others like them.

ALEXIS CHRISTOFOROUS: All right, we're going to leave it there. Jim Fish, CEO of Waste Management, good to see you. Have a good weekend.

JIM FISH: Great to see you. Have a great weekend.