Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Casella Waste Systems Inc. Jumped 13% in September

By Travis Hoium – Oct 6, 2016 at 5:46AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

An increase in guidance at Casella Waste Systems Inc. had investors excited last month.

Image source: Getty Images.

What happened 

Shares of Casella Waste Systems Inc. (CWST 2.31%) popped 13.3% in September after the company upped its earnings outlook and indicated that it may be refinancing debt. 

So what

Late in September, management said that it was increasing full-year adjusted EBITDA guidance to $115 million-$117 million, a significant improvement from the $111 million-$115 million management previously expected. Revenue guidance of $550 million-$560 million and normalized free cash flow guidance of $20 million-$24 million were unchanged.

The company also invited lenders to consider refinancing debt, including a new term loan of $350 million and a revolving credit line of $150 million, which would be used to pay off old debt. 

Now what

Management said that strong pricing caused the increase in outlook for the year, which is a good sign for investors looking into the waste business. Costs are usually difficult to adjust given the capital-intensive nature of the business, but if a company has pricing power the funds will flow all the way to the bottom line. Given the heavy debt load, I'd like to see the company prove it can generate net income before getting too excited, but this is definitely an incremental positive for Casella Waste Systems today. 

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.