Waste Connections Q2 Beats Estimates, UBS Upgrades to Buy

Waste Connections, Inc. closed its second quarter of 2026 with revenue of USD 2.56 billion, a 6.4 percent year-over-year increase that exceeded analyst consensus by roughly 0.9 percent. The company also posted adjusted earnings per share of USD 1.50, surpassing the forecast of USD 1.36, and subsequently raised its full-year 2026 outlook, signaling confidence in its operational trajectory and cash generation capabilities.

Following the results, UBS upgraded Waste Connections to Buy from Neutral and lifted its price target to USD 200 from USD 176. The bank argued that the stock’s valuation had become compelling after a period of underperformance, with shares trading at only a 5 percent EV/EBITDA premium over waste-sector peers, a significant compression from the historical average premium of around 28 percent.

UBS upgrade driven by valuation compression

According to GN stocks and analyst commentary, UBS noted that Waste Connections shares had fallen to near their 52-week low of USD 146.89 and were down nearly 11 percent year-to-date as of mid-September 2026. This decline widened the discount to sector peers, which UBS views as an entry point given the company's stable cash flow profile.

The upgrade rationale also hinges on future cash flow dynamics. UBS projects compound annual free cash flow growth of approximately 17 percent from 2026 through 2029. This projection is supported by the anticipated wind-down of elevated capital expenditures related to the Chiquita Canyon landfill, a major investment driver that is expected to diminish after 2026.

Quarterly performance exceeds market expectations

The second-quarter results demonstrated resilience in the waste management sector. With revenue of USD 2.56 billion, the company outperformed the modest growth seen in some broader market benchmarks. The beat in adjusted EPS of USD 1.50 versus the USD 1.36 consensus highlighted effective cost management and pricing power, reinforcing the narrative of a stable, defensive business model.

Forward outlook reflects capex reduction

Looking ahead, the company’s raised full-year 2026 guidance suggests that the peak of its capital intensive phase is passing. Analysts note that while estimated sales growth of 5.8 percent for the next 12 months implies a slight slowdown from prior trends, the reduction in Chiquita-related spending should boost free cash flow margins, which have declined by roughly 2.5 percentage points over the last five years due to defensive investments.