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On Tuesday, BMO Capital Markets expressed a steady outlook on GFL Environmental (NYSE:GFL) shares, with analyst Devin Dodge increasing the price target slightly to $48.00, up from the previous $47.00, while maintaining a Market Perform rating on the stock. According to InvestingPro data, the stock currently trades at $44.17, with analyst targets ranging from $27.61 to $70.19, suggesting mixed views on the company’s valuation. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading near its fair value. Dodge’s assessment came after the company’s fourth quarter of 2024 results, which seemed to have disappointed some investors. The share price notably weakened as GFL Environmental’s pro forma adjusted EBITDA and free cash flow (FCF) for the quarter fell short of what investors had anticipated for the 2025 outlook. Despite recent challenges, InvestingPro data shows the company has achieved a strong 29.36% return over the past year, with EBITDA reaching $1.35 billion in the last twelve months.
The BMO analyst noted that the initial guidance for 2025 might have been conservatively high, suggesting that there is a potential for earnings estimates to surpass expectations. Dodge pointed out that while the valuation at present does not warrant a more bullish stance, there are factors within the company’s control that could improve its financial performance. He mentioned that GFL Environmental has several "self-help opportunities" and a significant potential for growth through mergers and acquisitions (M&A).
Despite the modest increase in the price target, the Market Perform rating indicates that BMO Capital Markets advises investors to hold their positions in GFL Environmental for the time being, without a clear signal to buy or sell. The analyst’s comments reflect a belief in the company’s ability to improve its earnings, but with a valuation that does not yet fully convince the firm to change its neutral stance. InvestingPro analysis reveals the company trades at an EV/EBITDA multiple of 19.29x, with analysts forecasting positive earnings of $0.56 per share for 2024. For deeper insights into GFL Environmental’s valuation and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 US stocks.
GFL Environmental’s recent share price movement seems to reflect the market’s reaction to its Q4/24 performance and the outlook for 2025. The company, which operates in the environmental services sector and commands a market capitalization of $17.4 billion, has the opportunity to leverage its business strategies and market opportunities to enhance its financial metrics in the coming years. InvestingPro data indicates revenue growth of 4.09% in the last twelve months, with further growth of 4% forecast for 2024.
Investors in GFL Environmental will likely continue to monitor the company’s progress on its stated opportunities for improvement and growth through strategic initiatives and potential M&A activities as outlined by BMO Capital Markets. The updated price target reflects a slight adjustment in expectations, acknowledging the possibility for upside in the company’s earnings estimates.
In other recent news, GFL Environmental reported strong financial results for fiscal year 2024, with fourth-quarter organic solid waste price and volume growth exceeding expectations, leading to a notable increase in adjusted EBITDA margins. The company’s adjusted free cash flow for the year rose by 17% to C$820 million, surpassing guidance. Looking ahead, GFL forecasts a revenue increase of 7.2% for fiscal year 2025, which is higher than the consensus estimate, alongside an anticipated AEBITDA of C$2.5 billion. In analyst updates, Stifel upgraded GFL Environmental to a "Buy," maintaining a target of C$85, while Citi initiated coverage with a "Buy" rating and a $53 target. Conversely, BMO Capital Markets lowered its price target to $47, maintaining a "Market Perform" rating.
The company recently announced the sale of its Environmental Services segment for C$8.0 billion, a move that is expected to reduce financial leverage and potentially boost mergers and acquisitions activity. Raymond (NSE:RYMD) James highlighted the transaction’s creative structure, maintaining an "Outperform" rating and a $50 target, while noting that GFL’s solid waste assets might be undervalued. CIBC (TSX:CM) raised its price target to Cdn$75, citing potential for significant margin expansion in the coming years, projecting GFL’s margins to reach the low-30% range. These developments indicate a period of strategic adjustments and financial growth for GFL Environmental.
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