Advanced Disposal Has An Advantageous Position In One Of The Most Reliable Sectors

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Deutsche Bank’s Debbie Jones expects Advanced Disposal Services Inc ADSW to outperform over the coming 12 months, driven by “benefits from a continued focus on M&A, de-leveraging efforts and execution in building credibility as a public company post the IPO in early October.”

Jones initiated coverage of the company with a Buy rating and price target of $23.

Positioned For Growth

The analyst expects Advanced Disposal’s near-term volumes to remain muted, while expecting the company to see 3-4 percent revenue growth in 2017 and 2018, driven by volume gains, new contract wins and pricing.

The company expects revenues in the range of $359-$363 million for the quarter ended September 30.

“Looking ahead, management is targeting $30M+ per year on acquisition spend and expects this to drive 1-2 percent growth. We believe these tuck-ins will be more meaningful when compared to larger publicly-traded peers,” the Deutsche Bank report said.

Jones believes the exposure to a defensive industry offers Advanced Disposal opportunities for “outsipze” growth through bolt-on acquisitions, with the company having completed 43 such acquisitions since 2013.

In Other News

On October 19, the company announced the resignation of Christopher Beall from its board of directors, associated with Advanced Disposal’s transition toward increasing the number of independent directors on its board.

Apart from its attractive deleveraging potential, Jones stated the company intends to undertake a refinancing, which is currently estimated to provide $16 million in interest savings, although it could entail a one-time cost that could impact deleveraging.

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Posted In: Analyst ColorLong IdeasInitiationAnalyst RatingsTrading IdeasDebbie JonesDeutsche Bank
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