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A Morgan Stanley analyst moved Waste Connections (NYSE:WCN) to its Top Pick in Business Services and downgraded shares of Equifax (NYSE:EFX) to Equal-Weight from Overweight in a note to clients Tuesday.
The analyst said the firm likes the defensiveness of the waste industry in the current uncertain market environment but downgraded Equifax as the risk/reward is now more balanced.
The analyst has a $158 price target on Waste Connections. He wrote: “In this environment, we continue to like the defensiveness of the waste industry, given its resiliency, and move WCN to our Top Pick in Business Services due to its strong pricing power, leading FCF margins, and potential for accretive M&A. WCN has 90% of revenue in exclusive and secondary markets, which we think sets it up well for sustained high levels of pricing through the end of the year and into ’23.”
The Morgan Stanley analyst maintained a $230 price target on Equifax, telling investors the more balanced risk-reward comes as the stock now trades within 4% of its price target.
“We had been positive on the stock as we expected EFX’s growth to exceed that of most Info Services companies in ’22-’24, driven primarily by its Workforce Solutions segment, and also from an anticipated strong consumer lending environment. While we still expect EFX to have above-peer top-line growth longer term, during the next 6 months the company will continue to be impacted by significantly negative growth in mortgage applications, and we view the bureaus as being most at risk (out of our Info Services companies) in the event of a consumer slowdown,” said the analyst.
