Waste Connections (WCN) is positioned to return to typical outperformance as volume challenges are no longer a concern, but recycling remains a headwind to revenue growth, Morgan Stanley said in a Thursday research note.

The company posted largely in-line Q4 results, but lighter volumes offset higher-than-expected core price. It also sees momentum in operating metrics like safety, expected to be a driver of additional margin gains, according to the note.

The company's lower-than-expected free cash flow guidance for 2026 could be attributed to higher-than-expected Chiquita Canyon landfill costs in 2025, analysts wrote.

Waste Connections believes the Chiquita issues are due to its location in California, which presents political challenges and higher costs of resolving regulatory issues compared with other regions, according to Morgan Stanley.

The brokerage said it reiterated its overweight rating on the stock and cut its price target to $205 per share from $220.

Price: 160.96, Change: +3.38, Percent Change: +2.14