On Friday, RBC Capital Markets adjusted its outlook on GFL Environmental Inc. (NYSE: NYSE:GFL), increasing the price target to $48 up from $46, while reaffirming an Outperform rating on the stock. The revision follows GFL Environmental's second-quarter earnings, which aligned with RBC's and consensus estimates. Additionally, the company has updated its 2024 Adjusted EBITDA guidance with a slight increase.
GFL Environmental has caught the market's attention with its recent announcement of considering an auction for its Environmental Services division. The management of GFL estimates that this segment could command an enterprise value of approximately $6 billion to $7 billion, based on a mid-teens multiple of the segment's projected 2023 EBITDA before corporate overhead.
RBC Capital's analysis highlights the perceived undervaluation of GFL shares compared to its industry peers. The potential sale of the Environmental Services business is seen as a strategic move that could offer more financial flexibility and add value for shareholders.
The firm's decision to raise the price target reflects confidence in GFL Environmental's ongoing performance and strategic initiatives. According to RBC Capital, the company's current valuation, when measured against its counterparts, suggests that there is still room for growth in its stock price. The auction process for the Environmental Services business is particularly noted as a factor that could further enhance shareholder value.
In other recent news, GFL Environmental Inc. has been making significant strides in its operations. The company reported strong Q1 2024 results, exceeding expectations with a 7.7% increase in pricing and a robust acquisition strategy. Despite a 3% decline in volume growth, GFL Environmental remains on track to meet or surpass its full-year volume projections. Further, GFL Environmental has updated its 2024 Adjusted EBITDA guidance with a slight increase.
In a strategic move, GFL Environmental is considering an auction for its Environmental Services division, which could command an enterprise value of approximately $6 billion to $7 billion.
Analysts from Truist Securities and TD Cowen maintain a Buy rating on GFL Environmental, suggesting that divesting the Environmental Services business could significantly decrease GFL's leverage, a key concern for investors.
However, BMO Capital has downgraded GFL Environmental's stock from Outperform to Market Perform, citing high market expectations for the potential sale of the Environmental Services division. On the other hand, RBC Capital Markets has reaffirmed an Outperform rating on GFL Environmental's stock, increasing the price target to $48 from $46, reflecting confidence in the company's ongoing performance and strategic initiatives.
ADW Capital Management, a significant shareholder in GFL Environmental, has publicly urged the company to consider selling its Environmental Solutions division or potentially the entire business. In addition to these developments, GFL Environmental has attracted interest from private equity sponsors for a potential partial or full acquisition of the company's operations.
InvestingPro Insights
Following RBC Capital Markets' optimistic outlook on GFL Environmental Inc., InvestingPro data and tips provide additional context to the company's financial health and market performance. GFL Environmental has demonstrated consistency by raising its dividend for four consecutive years, a sign of confidence in its financial stability and commitment to rewarding shareholders. Moreover, analysts expect net income to grow this year, which may be a contributing factor to RBC Capital's positive rating and increased price target.
InvestingPro data reveals that GFL's market capitalization stands at $15.11 billion, and while the company is not profitable over the last twelve months, analysts predict it will be profitable this year. The company's revenue growth over the last quarter was 5.99%, indicating a positive trajectory. Additionally, GFL has experienced a strong return over the last three months, with a 19.99% price total return, aligning with the market's favorable reception to its strategic moves.
For investors seeking a deeper analysis and more comprehensive insights, InvestingPro offers additional tips on GFL Environmental's financials and market trends. With a total of 11 InvestingPro Tips available, including insights on earnings revisions and valuation multiples, subscribers can access a wealth of information to inform their investment decisions.
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