On Friday, BMO (TSX:BMO) Capital Markets adjusted its outlook on GFL Environmental Inc. (NYSE:GFL), reducing the price target to $47.00 from the previous $49.00 while maintaining a Market Perform rating on the shares. According to InvestingPro data, GFL currently trades at $42.18, with analyst targets ranging from $27.39 to $69.65, reflecting mixed market sentiment on this $16.58 billion market cap company. The adjustment follows the lifting of restrictions after the company's announcement of a deal to sell a majority interest in its Environmental Services (ES) division.
The BMO analyst highlighted the transaction's advantages, noting minimal tax implications and GFL's retention of a minority stake. The deal's valuation reportedly aligns with the higher end of prior expectations. The sale is expected to lower GFL's financial leverage, potentially paving the way for an increase in mergers and acquisitions activity. InvestingPro analysis shows the company has a FAIR financial health score, with analysts expecting profitability this year despite current challenges.
The analyst also pointed out that the investor response to the repurchase option was mixed, though it offers GFL the opportunity to reacquire a more significant portion at a fair valuation if the ES business meets its medium-term goals.
In other recent news, GFL Environmental has disclosed significant recent developments. The company reported nearly 20% growth in adjusted EBITDA for the third quarter of 2024, setting a new record with an adjusted EBITDA margin of 31.1%. This performance was attributed to disciplined pricing strategies, efficient operations, and the impact of recent acquisitions. GFL Environmental also announced plans for substantial investments in mergers and acquisitions, emphasizing the expansion of its recycling and renewable natural gas infrastructure.
Raymond (NS:RYMD) James maintained an Outperform rating on GFL Environmental, highlighting the creative sale of its Environmental Services segment, while CIBC (TSX:CM) analysts also held an optimistic stance on the company. Both firms anticipate significant growth in the company's comparable adjusted EBITDA margin over the next few years. GFL Environmental also revealed intentions to allocate approximately $900 million towards growth investments and mergers and acquisitions, following the potential sale of its Environmental Services segment.
Lastly, GFL Environmental aims to provide a detailed outlook for 2025 following the potential sale of its Environmental Services segment. The company projects mid-single-digit organic growth, double-digit adjusted EBITDA growth, and over 100 basis points of margin expansion for 2025.
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