Waste-to-energy services provider Covanta (CVA +1.2%) is poised to power higher, offering a potential 25% upside with a generous yield after hiking its dividend twice this year, according to a Barron's profile.
CVA is a "free cash flow-generating machine," converting ~50% of its EBITDA to free cash; it currently generates ~$260M/year of free cash flow for an attractive 10% yield.
A new cost savings initiative, with a targeted benefit of $30M to 2015 EBITDA, combined with the opening of a new facility in Canada and the start of a large waste disposal contract with NYC could lift cash flows significantly in the next year, David Englander writes.
Wunderlich raises its price target for CVA shares to $24 from $22, noting that yesterday's news also included a reinstatement of the Dublin project; even under a conservative scenario about the final timing and success of the cost savings plus Dublin, the firm thinks the news warrants an incremental $1.50/share in valuation (Briefing.com).
Covanta Holding Corp is a developer, owner and operator of infrastructure for the conversion of waste to energy known as 'energy-from-waste', as well as other waste disposal and renewable energy production businesses.