KeyBanc Has 'Greater Confidence' In Waste Management's Leadership Team

Waste Management, Inc. WM hosted its annual investor day conference Thursday, prompting KeyBanc Capital Markets to raise its price target for the stock.   

The Analyst

Sean Eastman maintained an Overweight rating on Waste Management with a price target lifted from $112 to $120.

The Thesis

Waste Management guided for revenue growth of 4-6 percent through 2021; adjusted EBITDA growth of 5-7 percent; and free cash flow growth of 5-7 percent.

These longer-term targets look "solid" and do not factor in the Advanced Disposal Services Inc ADSW acquisition, Eastman said in a Sunday note.

The company outlined an upside scenario of annual EBITDA growth in the 7-9-percent range on the back of technology-driven growth, cost reduction initiatives or above run rate acquisitions, he said.

The analyst said he now has "greater confidence" that the company is backed by the right leadership team with a disciplined growth strategy. Waste Management is in a position to expand on "solid operational improvement" seen over the past few years, he said. 

The company left its 2019 EBITDA, free cash flow and earnings guidance unchanged despite weakness in old corrugated container prices throughout May, Eastman said, adding that this is due to better-than-expected performance in the collection and disposal businesses.

Despite minimal commentary on the Advanced Disposal transaction, Waste Management's stock "continues to look attractive" versus its peers, according to KeyBanc. 

Price Action

Waste Management shares were up 1.56 percent at $111.10 at the time of publication Monday. 

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Waste Management Shares Already Reflect 2019 Growth Prospects, UBS Says In Move To Sidelines

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