Analysts Split On Progressive Waste's Strategic Review

Gabelli & Company on Wednesday issued a company report on Progressive Waste Solutions Ltd (USA) (NYSE: BIN) after the company's board of directors announced a review of strategic alternatives. Gabelli rates Progressive Waste Solutions as a Buy, while a price target is unavailable.

Research analyst Tony Bancroft wrote, "BIN is a well-managed pure play solid waste company which maintains strong assets in its Canadian operations. We believe the company is attractively valued at 7.9x 2017P EBITDA. BIN remains focused on generating strong cash flow and allocating capital to best build shareholder value."

A report issued by Bloomberg stated that the company is exploring a sale after cutting their profit forecast due to rising costs. Executives of Progressive announced that it hired JPMorgan Chase as its financial advisor, however, it did not validate the comments made in the report. Gabelli believes that if offered for sale, the company would be most attractive to private equity firms rather than strategic buyers due to leverage differential and concerns over differing business models with their peers.

As an investment, analysts believe that even if the company is not offered for sale, the stock could be a solid investment due to strong housing and GDP drivers and the potential of being awarded a $3 billion New York City DSNY contract.

Stifel analyst Michael Hoffman also gave his opinion on Progressive Waste saying that the company is "poised to produce meaningfully better FCF in 2016."

The increase in FCF can be driven by a low cash tax rate and a reduction in maintenance spending. As for the possibility for a sale, Stifel believes that all options are on the table including a sale of a piece of the company, or going in the opposite direction by pursuing accretive acquisitions.

Hoffman wrote that because most strategic buyers are not headquartered in Canada the advantage of a low tax rate would not be as strong and would not have as large an effect on FCF as it currently does for Progressive Waste's current financials.