Credit Suisse Sees Buying Opportunity In Waste Connections

Following the announcement  by the U.S. Treasury that it intended to take action to limit earnings stripping and inversions, fears of the merger getting derailed led to pullback in both Waste Connections, Inc. WCN and Progressive Waste Solutions Ltd (USA) BIN.

Credit Suisse’s Andrew E. Buscaglia maintained an Outperform rating on Waste Connections, with a $66 price target.

Buscaglia believes the 7 percent decline in the company’s share price offers a “rare” buying opportunity.

Related Link: Waste Connections-Progressive Waste 'Committed' To Merger After Tax Inversion Selloff

Merger On Track

Waste Connections and Progressive Waste Solutions issued a joint press release stating they remained committed to the merger and expected a less than 3 percent impact to the $635 million free cash flow target.

Both stocks rallied following this press release, given that the deal’s long-term prospects remain largely intact.

“We recommend investors take advantage of any further weakness to own a best-in-class company grounded by a strong/defensive waste backdrop with upside optionality,” Buscaglia stated.

Treasury Announcement

Buscaglia explained that the U.S. Treasury’s announcement “focused on two areas: 1) Section 7874 targeting serial inverters (less relatable to WCN/BIN) and 2) Section 385 which looks to limit earnings stripping (relatable to WCN/BIN).”

Pointing out the long-term upside potential of the impending merger, Buscaglia said that the $625 million free cash flow target could prove conservative, given the synergy potential.