- Stifel analysts today issued a raft of downgrades in the solid waste sector, believing investor need to pause on the group given the risk of recycling headwinds ahead in Q4 and next year.
- Waste Management (NYSE:WM), Advanced Disposal (NYSE:ADSW), Casella Waste (NASDAQ:CWST) and Republic Services (NYSE:RSG) all fell between 3.7% and 7.8% today after Stifel downgraded the names to Hold following three years rated Buy.
- The group has doubled during the period and now could be considered priced to perfection, leaving no room for unfavorable news, but OCC recycled paper prices have plunged ~$80 from the peak in August; Stifel says this is a relevant topline headwind with a more modest but real profit hit in Q4 2017 and FY 2018.
- The firm also notes Q3 hurricane expenses that could weigh on the group - pennies not nickels, but negative nonetheless and with real headline risk.
- Waste Connections (NYSE:WCN) is Stifel's top pick among solid waste names, with a Buy rating and $80 price target, as the company boasts a unique market selection and is maximizing contract structure and asset positioning to drive best-in-class free cash flow growth and conversion.
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