Bank of America Merrill Lynch Remains Neutral On Casella Waste Systems After Earnings

Bank of America Merrill Lynch has a Neutral rating and a $8 price target on shares of Casella Waste Systems CWST after it reported earnings. In a note to investors, Bank of America Merrill Lynch writes, "CWST reported F4Q11 EBITDA of $12mn, which was well below our $20mn forecast and the company's guidance of $15.5mn-19.5mn (on same basis as our forecast). The downside was mainly due to lower revenues tied to a solid waste volume shortfall of 360bp, which was partly driven by severe Northeast weather conditions that were also a factor in F3Q11. CWST also faced more difficult y/y comparisons in F4Q given that seasonal gains were more pronounced in the prior year quarter (due in part to construction activity related to a temporary homebuyer tax credit). The volume weakness coupled with higher operating expenses (e.g. landfill leachate costs) yielded a 450bp gross margin shortfall that brought margins to the lowest level in more than 15 years. Additionally, selling expense (as a % of revenue) was 170bp higher than our estimate. Core price growth of 0.4% was essentially in-line with our forecast and well below the company's guidance of 50bp above CPI for F4Q11, which confirms our, which was half due to the volume weakness and half due to higher costs (even after factoring in the discretionary bonus payment) and implies that some additional cost reductions may be required if volumes do not sustainably rebound." Shares of CWST lost 24 cents yesterday to close at $5.82, a loss of 3.96%.