KeyBanc Starts Waste Connections Inc. (WCN) at Buy, Cites R360 Deal Accretion and Strong Metrics

September 26, 2012 6:46 AM EDT
Get Alerts WCN Hot Sheet
Price: $79.67 -0.08%

Rating Summary:
    12 Buy, 3 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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KeyBanc initiates coverage on Waste Connections Inc. (NYSE: WCN) with a Buy. PT $37.00, citing R360 deal accretion and strong operating metrics.

The firm cited numerous catalysts for its Buy rating:

1) R360 Acquisition Should Be Solidly Accretive to 2013 EPS. "Our estimates suggest it could be accretive to earnings by 15-36% in 2013 (implying pro forma potential EPS of $1.82 and $2.15 based on our base and best case scenario analysis, respectively). Of note, our 2013 EPS estimate of $1.58 does not include R360 as it is not expected to close until 4Q12."

2) Protected Markets Should Foster More Favorable Pricing, Margin - Since 2004, WCN's impressive pricing improvement and EBITDA margin profile have exceeded the average of its public peer group by an annual rate of 130 bps and 350 bps, respectively.

3) Superior Cash Flow Positions WCN for Other Value Creating Events - WCN generates superior cash flow relative to its peers. Specifically, on a percent of sales basis, WCN has averaged net free cash flow of 14.8% since 2004, 400 bps higher than the combined average of 10.8% for its peers over the same period.

For an analyst ratings summary and ratings history on Waste Connections Inc. click here. For more ratings news on Waste Connections Inc. click here.

Shares of Waste Connections Inc. closed at $30.22 yesterday.

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