Waste Connections rating upgraded to A3 by Moody’s Ratings

Investing.com -- On April 23, 2025, Moody’s Ratings upgraded the senior unsecured rating of Waste Connections, Inc. (NYSE:WCN) to A3 from Baa1. Simultaneously, the outlook for the company was changed from positive to stable.

The upgraded rating and stable outlook are indicative of Moody’s expectation of a continued strong operating performance from Waste Connections. The company’s industry-leading margins and healthy cash flow are expected to persist, even in the face of macroeconomic challenges and volume pressures. The non-discretionary nature of demand in the solid waste industry, coupled with positive pricing and good cost discipline, is anticipated to support steady revenue and EBITDA growth. These factors are expected to drive strong free cash flow, providing the capacity to fund acquisitions or repay debt. Moody’s also anticipates that Waste Connections will maintain a well-balanced financial policy.

Waste Connections’ A3 senior unsecured rating reflects its strong market position as the third-largest waste services provider in North America. The company’s high portion of revenue under long-term contracts provides a stable recurring revenue base. Waste Connections’ decentralized operating model enables it to focus on market share in exclusive and secondary markets. These factors contribute to the company’s strong adjusted EBITDA margin, which is expected to approximate 33% over the next year. This projection holds despite ongoing cost inflation, labor availability constraints, and volatility in recycled commodity prices.

Cash flow from operations, less capital expenditures and dividends, is expected to remain robust at over $900 million annually over the next couple of years. This cash flow can be used to fund acquisitions.

While the revenue base of Waste Connections is modest compared to similarly rated peers, strong credit metrics balance the scale concerns. Acquisition spending is expected to be high in 2025, moderating after a year of outsized spending of over $2 billion. Moody’s expects the company’s adjusted debt-to-EBITDA to fall toward 2.7x over the next year.

Waste Connections’ liquidity is supported by its $3 billion revolving credit facility, set to expire in February 2029, and the expected healthy free cash flow over the next 12-18 months. The company had approximately $780 million available at December 31, 2024, net of amounts drawn and letters of credit.

There are no near-term debt maturities for the company, and Moody’s expects acquisitive growth to continue. However, Waste Connections could draw on the facility for larger acquisitions.

Moody’s stated that the rating could be upgraded with significant and prudent scale expansion that maintains the continuity of the company’s unique operating model. A potential downgrade could occur if the company aggressively expands in markets, leading to more competitive bidding and pricing pressure, or if there is a material change in financial policy.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.