Waste Management, the titan of trash, has been hitting it out of the park lately. Record margins, impressive cost controls, and a bold commitment to sustainability have analysts singing their praises. But amidst the flurry of impressive figures and pronouncements about the "customer lifetime value model," a quiet revolution is brewing within Waste Management's recycling business – one that could fundamentally reshape the company's future and might just be masked by the recent announcement of their partnership with Major League Baseball.

On the surface, the MLB partnership seems like a classic sustainability play. Waste Management, the "official sustainability partner," will help all 30 MLB clubs reduce their environmental footprint. It's a great PR move, associating the company with America's pastime and projecting an image of green leadership. But is there more to it than meets the eye? Could this partnership be a calculated maneuver to fuel the engine of a far more ambitious and potentially lucrative strategy?

The answer lies in a seemingly innocuous statement tucked away in the Q1 2024 earnings call transcript: "We expect to leverage our expertise to build comprehensive plans to improve the environmental impact of Major League Baseball and its clubs." This isn't just about helping MLB recycle a few more plastic cups. It hints at a strategic partnership where Waste Management becomes an integral part of MLB's operations, potentially managing waste and recycling streams for entire stadiums, training facilities, and even league events.

Why is this significant? Because Waste Management is simultaneously undergoing a massive overhaul of its recycling infrastructure, investing billions in state-of-the-art automation. This, coupled with the shift towards a "fee-for-service" model, insulates the company from the unpredictable swings of commodity prices, creating a stable and predictable revenue stream. Furthermore, these upgraded facilities produce higher quality recycled materials, commanding premium prices in the market.

Here's where the MLB partnership comes into play. Imagine a scenario where Waste Management, by virtue of its partnership, has preferential access to MLB's massive waste stream. This guaranteed supply of recyclable materials, fed into Waste Management's increasingly efficient and profitable processing network, creates a powerful and self-reinforcing loop.

Crunching the Numbers

Let's crunch some numbers. Waste Management is aiming for $800 million in run-rate EBITDA from its sustainability investments by the end of 2026. With the MLB partnership, this figure could be significantly higher. Consider the potential scale: 30 MLB stadiums, each hosting 81 home games a year, plus spring training facilities, league offices, and events like the All-Star Game and World Series. The volume of recyclable material generated by these operations is staggering.

If Waste Management can capture even a fraction of this material, leveraging its upgraded facilities and fee-for-service model, the financial implications are immense. It's not just about hitting a home run on sustainability; it's about creating a new profit center that could drive substantial long-term growth for the company.

Driver Turnover Improvement

Of course, this is just a hypothesis. But the clues are there, hidden in plain sight. The MLB partnership, while seemingly a feel-good sustainability initiative, could be the linchpin in a far more ambitious strategy to turn recycled materials into a reliable and highly profitable revenue stream. And while other analysts are focused on Waste Management's impressive margins in their traditional business, they might just be missing the quiet revolution happening in recycling – a revolution that could redefine the company's future and turn their trash into treasure.

"Waste Management, Inc. (NYSE:WM) Q1 2024 Earnings Conference Call April 25, 2024 10:00 AM ET ... Jim Fish ... We’re also excited to announce that WM was just named the official sustainability partner of Major League Baseball. WM’s work with MLB is the first collaboration of its kind between an environmental services company and a professional sports league team -- sports team league. With this partnership, we have the opportunity to offer services to all 30 MLB clubs in the United States and Canada. We expect to leverage our expertise to build comprehensive plans to improve the environmental impact of Major League Baseball and its clubs. ..."

"Waste Management, Inc. (NYSE:WM) Q4 2023 Earnings Conference Call February 13, 2024 10:00 AM ET ... John J. Morris ... In the fourth quarter, we achieved a noteworthy milestone as driver turnover reaches lowest point at 18.4%, showing improvement as the year progressed. Additionally, our strategic automation initiatives are yielding positive results in collection efficiency with all three lines of business improving meaningfully in the fourth quarter compared to last year. The results of our technology and automation investments gained traction in the latter part of 2023, leading to significant strides in labor cost management. We expect this to continue into 2024 as we broaden the deployment of our tools across additional sites. ..."

"Did you know that Waste Management's largest landfill in the U.S., the Puente Hills Landfill in California, is so large it can be seen from space? It's a stark reminder of the scale of our waste problem, but also of Waste Management's potential to turn this challenge into an opportunity."