Cleanaway Waste Management Ltd (ASX: CWY) reported its first-half results this week, and on the back of an increase in underlying profit, the company boosted its dividend payout by almost 20%.
The analyst teams at Macquarie, Barrenjoey and Morgans have all had a look at the result, and all three believe the shares are currently trading at a discount.
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Results beat expectations
We'll get to where they think the shares will go later, but first, let's have a look at the profit result.
Cleanaway this week reported first-half revenue of $2.205 billion, up 13.7%, driven by the strong performance of its solid waste segment, the company said.
Profit from operations fell 21.2% to $137.2 million, with this result including $91 million in one-off items, while underlying net profit was 17.8% higher at $109.7 million.
Cleanaway also boosted its interim dividend by 19.6% to 3.35 cents per share, fully franked.
Cleanaway Managing Director Mark Schubert said regarding the result:
We are pleased to upgrade our FY26 underlying EBIT guidance to between $480 million and $500 million following a robust first half and outlook. This upgrade to guidance demonstrates both the underlying strength of our business and the delivery on commitments we have made to shareholders to build a stronger, more profitable business. We have a track record of growing revenue, expanding margins, improving capital efficiency, and returning value to shareholders, and we have a strategy and plan to continue this performance in the years ahead. Our refreshed strategy is designed to deliver strong and growing free cash flow.
The previous EBIT guidance range was for earnings of $470 to $500 million.
Mr Schubert said the new strategy would deliver "at least" $35 million in annualised cost savings from FY27, "with initial benefits of $15 million to be realised in the second half of FY26''.
Cleanaway shares looking cheap
Now to the brokers, and Barrenjoey is the least bullish on the company, with a neutral rating and a 12-month price target of $2.80 on Cleanaway shares, compared with $2.55 currently.
Barrenjoey said the company's EBIT of $228 million was 3% ahead of consensus expectations, but it had reduced its price target to $3 due to changes in cash flow forecasts.
Over at Morgans, they have a price target of $3.11 on Cleanaway shares, saying the result was a mixed bag and the next catalyst for the shares would be Cleanaway's investor day, which will be held in April.
Morgans said the strong performance of the solid waste services division, which contributes about 75% of earnings, was a positive.
And lastly, the Macquarie team has the most bullish price target on Cleanaway shares at $3.40.
Macquarie said the valuation was looking attractive given the company's growth prospects and, "visibility is improving as conditions firm, efficiency gains momentum and cost-out accelerates''.
