Wedbush Upgrades Waste Management (WM) to Outperform

Wedbush upgraded Waste Management (NYSE: WM) from Neutral to Outperform with a price target of $55.00 (from $46.00). Analyst Al Kaschalk sees improved margin and free cash flow growth.

"Our upgrade is predicated on increased confidence that WM’s pricing program can continue and more than offset volume declines, suggesting we are in the early innings of an improving margin story. With net pricing above cost inflation by 50-100bps and reinvestment of capital in profitable and higher-growth businesses, we now believe WM can deliver baseline FCF of $1.3+ billion, with annual growth of 4-5% over the medium term from: (i) annual price increases netting 2-2.5% price realization despite a low inflation environment; (ii) operating cost optimization, service improvements and lowered SG&A cost structure; (iii) volumes returning to flat comp from down 1-2%; and (iv) targeted investments in higher-margin businesses, including disposal assets servicing the energy services sector," said Kaschalk.

"Expected to be armed with $1.4 billion of net proceeds after debt repayment from the sale of Wheelabrator (WTI) later this year, we now believe WM is positioned to grow annual EPS 8-10% over the medium term. With dividend yield of 3.18%, shares offer nearly 20% total return from current levels," he added.

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

Shares of Waste Management closed at $47.18 yesterday.

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