The S&P/ASX 200 Index (ASX: XJO) is trading in the red on Wednesday. At the time of writing, the index is down 0.75% for the day. The drop follows records of the index reaching an all-time high of 9,108.60 points in afternoon trade yesterday. For the past month, the index is 2.45% higher, and over the year, it is 10.01% higher.
But ASX 200 stock Cleanaway Waste Management Ltd (ASX: CWY) is tracking along a different path to the index. Today, its share price is down 2.44% and changing hands at $2.595 a piece.
The dip follows Cleanaway's trading update and annual general meeting yesterday. Management said that the business suffered subdued trading conditions in the first quarter. It confirmed its FY26 earnings guidance of $470 million to $500 million but warned that earnings would be weighted more heavily in the second half of the year.
The waste management company's shares have plummeted 12.03% over the past two weeks after peaking at a 52-week high of $2.95 on 8 October. For the year, the share price is now down 9.9%.
But it's not all bad news. Following Cleanaway's release, Macquarie Group Ltd (ASX: MQG) wrote to investors to confirm its positive outlook on the stock.
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The ASX 200 stock is tipped to stage a turnaround
In its note, the broker confirmed its outperform rating on the shares, but lowered its price target to $3.45. In August, the broker's target on the shares was $3.50.
Despite the reduction, at the time of writing, the new target price still represents a potential 34.9% upside for investors over the next 12 months.
"Valuation. We trim our SOTP-based TP to $3.45ps (from $3.50ps), driven by earnings changes. Our TP implies a FY27 EV/EBIT of 18.2x, in line with CWY's 10-yr average rating," Macquarie analysts said in their note.
"Outperform. The CWY thesis remains attractive, underpinned by a solid EPS growth outlook, attractive valuation comparisons to US peers, and a broadly supportive macro and regulatory backdrop. We look forward to tidier execution."
What did Macquarie have to say about Cleanaway's quarterly update?
The broker said it expected the ASX 200 company's skew to the second half of the year. But it noted that soft market conditions, challenges at its New Chum landfill site, the synergy realisation, and cost-run off in the second half of the year were more than expected.
But Macquarie said it remains focused on the growth trajectory as market conditions and efficiencies improve.
"FY26 was always going to be a key year for momentum in CWY's Operational Excellence program. The group has been building a track record for core operational delivery (despite fringe disruptions) and we think that supports the 2H-weighted trading performance CWY points to (aided by synergy and cost actions)," it said in the investor note.
"Cash conversion and earnings quality (significant items) has been a talking point of investors in recent times. The group is focused on operational cash performance, while risk management remains a pertinent element of improving earnings quality by avoiding larger-scale loss events."
Macquarie has reduced earnings per share estimates for FY26, FY27, and FY28 by -2.1%, -1.7%, and -0.9%, respectively. Again, it cites soft trading, New Chum challenges, and the earnings weighting in the second half of the year.
