Al Root

Shares of waste hauler GFL Environmental rose Friday after the company's analyst event painted a bullish picture of its future.

GLF stock jumped 3.5% in Friday trading to $44.55, while the S&P 500 and Dow Jones Industrial Average were up about 0.1% and 0.3%, respectively.

There was a lot to discuss at the analyst event. GLF is selling a hazardous waste handling business and using that cash to pay down debt and buy back stock -- partly from private equity players who owned the company before its 2020 initial public offering.

After the deal, earnings before interest, taxes, depreciation, and amortization, or Ebitda, should land at about $$1.3 billion in 2025. Excluding the hazardous waste business makes comparisons difficult.

The numbers look fine. The guidance implies comparable growth of about 10% compared with 2024, which lines up with the most current Wall Street projections.

RBC analyst Sabahat Khan wrote Friday that he views the financial targets "positively," adding he sees the stock closing a valuation gap with other waste hauling peers. Khan rates shares Buy and has a $53 price target.

The hazardous waste sale is due to close any day now. After that, GFL will pay down some $2.6 billion in debt, putting its leverage metrics on par with those of companies such as Waste Management and Republic Services.

Beyond 2025, the company plans to grow Ebitda by almost 20% a year for the coming three years, driven by double-digit sales growth in percent terms and improving profit margins.

With planned share buybacks, that could yield about $2.70 in free cash flow per share in 2028. At a Waste Management and Republic Services multiple, GFL shares should trade for closer to $65 right now, up by some 45% from recent levels.

GFL trades for about 17 times projected 2028 free cash flow, while its large peers trade for closer to 25 times. Higher leverage and high private equity ownership are two reasons shares have traded at a discount in recent years.

Between now and 2028, the company still has a lot to do, including executing the sale and profitably growing its core waste hauling business. The plan makes a lot of sense, though.

Barron's recently wrote positively about GFL in early February, believing the coming catalysts would help boost shares. The shares are roughly flat since then.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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February 28, 2025 11:18 ET (16:18 GMT)

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