Fuel costs continue to influence short-term strategies for Waste Connections, affecting pricing and other factors, executives said in a Q3 earnings call Thursday. Yet the company again raised its outlook for 2026, citing better commodity prices and expected contributions from acquisitions.
CEO Ron Mittelstaedt highlighted “improving trends” across the company, particularly in commodity-driven revenue and higher landfill volumes.
“From an operational standpoint, we feel about as good as ever,” he said on the call, noting benefits from new RNG facilities and the integration of acquisitions worth about $130 million in annualized revenue.
These bright spots came despite headwinds from ongoing high diesel prices, including a “late quarter surge” that affected earnings before interest, taxes, depreciation, and amortization margins by about 30 basis points. Mittelstaedt said the company was recovering higher fuel costs “faster than expected.” The company has enacted fuel and material surcharges to mitigate those higher prices.
Diesel price impacts, both the “pace and magnitude” of cost increases were a notable theme of the call. CFO Mary Anne Whitney noted that those increases have affected costs for everything from “parts and materials, building and property, or capex repairs,” but noted that underlying margin expansion has kept the company well positioned to absorb some of those costs.
Fuel is likely to be a continued headwind through the year if prices stay elevated. This is already informing pricing decisions, she said. In some markets, competitors may not have imposed fuel surcharges, for example.
“The good news is we've seen better than expected retention and lower rollbacks as a result of our pricing tools,” she added, referencing the company’s recent adoption of AI-driven pricing tools. “It's helpful to have smart, selective price increases that can make a difference as well. But we're absolutely mindful of the incremental pressure that's out there.”
Commodity prices remained strong in Q2, which executives said was a bright spot that could help balance fuel headwinds in later quarters.
Recycling revenues were up 12% in the quarter, driven by higher OCC values but offset by ongoing weakness in plastics, Whitney said. Landfill gas sales were up 35% year over year due to higher volumes from new RNG facilities and higher values for RINs. RIN values were up about 10% year over year, averaging $2.50.
Elevated fuel prices haven’t yet made a notable impact on Waste Connections’ E&P business, Mittelstaedt said. However, if high fuel prices continue into 2027, there could be a scenario where drilling activity could increase to take advantage of demand, he said.
E&P activity has “stepped up” sequentially in Q3 after a similar step up in Q2, improving in both its U.S. and Canadian businesses. Yet Mittelstaedt cautioned that Waste Connections did not have long term plans to invest more heavily in this side of the business, but could consider tuck-ins. Though drilling activity has increased about 10% this year, that doesn’t seem to be spurred specifically by higher fuel prices, he said.
“Producers are not going to react to what they believe is a short-term stimulus. We have an on again, off again hourly war in Iran in the Strait, and that is a short-term phenomenon,” he said.
Mittelstaedt estimated that E&P activity accounted for an estimated 6% to 7% of business and largely helps balance the company’s portfolio. Yet the sector also comes with volatility that makes it less attractive as a major area for growth.
“In the U.S. and Canada, we are a disposal-oriented E&P company. We don't do transportation. We don't do field services. We're not interested in low-margin, highly competitive pieces of the business. We're predominantly a landfill and processing company in both countries.”
Waste Connections raised its outlook for 2026. Revenue is estimated to be approximately $10.09 billion, and net income is estimated to be about $1.18 billion. It’s the second time the company has raised its outlook for these this year.
