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Waste Management's Pricing Power And Long Term RNG Opportunity Wins Analyst Attention

Benzinga · 01/06/2023 12:19
  • Citigroup analyst Bryan Burgmeier initiated coverage on Waste Management Inc (NYSE:WM) with a Buy rating and a price target of $183.
  • WM is the largest operator in the high-quality U.S. waste business, nearly double the size of the next largest competitor.
  • The company is poised to benefit from whitespace growth in renewable natural gas investing $825 million through 2026 to add $400 million in run-rate EBITDA. 
  • While Burgmeier acknowledges 2022 stock outperformance, the RNG opportunity is still underappreciated, with 76 more candidate landfills vs. 17 announced. 
  • The analyst views the company's pricing power and long-term opportunity in renewable natural gas as "underappreciated."
  • Through resilient FCF generation, WM can continue to drive op improvements (investing $800 million in recycling to generate $180 million EBITDA by 2026) and bolt-on M&A. 
  • Near-term, the Street is underappreciating collection & disposal yield, and the analyst opened a 90-day catalyst watch, expecting WM to beat when the company reports 4Q earnings on February 1.
  • Price Action: WM shares traded higher by 2.62% at $157.91 on the last check Friday.