Imperial Capital, First Analysis Bullish On Casella Waste Systems

In a research brief published Friday morning, Imperial Capital analyst Scott Levine shared some highlights from their meetings with Casella Waste Systems Inc.'s CWST management (including Chairman and CEO John Casella, and CFO, SVP, and Treasurer Ned Coletta) in Boston.

The research firm issued an Outperform rating and a one-year price target of $6.50, based on 6.75x its FY16 EBITDA estimate. The target implies a 78 percent potential upside from recent stock prices.

Levine explained that “While CWST’s low margins, high debt burden, and modest cash flow have been persistent concerns among waste investors in recent years,” Imperial Capital now thinks the company’s fortunes are turning. The firm expects “improving macro conditions and increased traction from internal initiatives (…) to drive improvement in its margins and cash flows over the next few years.” While the recent pace of de-leveraging has been modest, they anticipate improving rates going forward, which, in time, should impact positively on Casella’s trading multiple.

First Analysis also issued a positive rating for Casella on Friday morning. The firm upgraded the stock from Equal-weight to Overweight, setting a $5 price target.

The stock recently traded at $3.86, up 5.4 percent.