Wedbush Cuts Progressive Waste Amid Expected Delay In Improvements

• Progressive Waste Solutions Ltd (USA) BIN shares are down 10 percent year-to-date, after having risen above $30 in early April.
• Wedbush’s Al Kaschalk downgraded the rating on the company from Outperform to Neutral, while reducing the price target from $31 to $28.
• An expected delay in operational improvements and margin expansion and continued weakness in the Canadian dollar vs the US dollar are the concern areas, Kaschalk noted.

The possibility of a positive surprise in Progressive Waste’s earnings has been limited by the delay in the company’s operational plan in the West region, analyst Al Kaschalk mentioned. The company reported preliminary 3QFY15 results with revenue and adjusted EBITDA falling short of the Wedbush estimates.

The shortfall is attributable to higher-than-expected operating costs in the western region and the negative impact of the Canadian dollar depreciation, Kaschalk added.

Progressive Waste affirmed its CY15 revenue guidance at $1.925-$1.945 billion, while reducing its adjusted EBITDA by nearly 5 percent to $480- $485 million, from $500-$515 million. The revised outlook reflects a delay in expected cost reductions, impact of lower special waste volumes and a more cautious view of the economic conditions in Western Canada, the Wedbush report stated.

The EPS estimates for FY2015 and FY2016 have been reduced from $1.20 to $1.06 and from $1.31 to $1.06, respectively.

“We remain comfortable with management’s mid-term (3-5 year) strategic plan of annual top-line organic growth of 4% aided by economic recovery, new business (contract wins) within the municipal market and the benefit of higher mix of Canadian based commercial revenue relative to its US-based competitors,” Kaschalk wrote.