Why Covanta (CVA) Stock Is Up Today

NEW YORK (TheStreet) -- Covanta (CVA) stock is gaining Tuesday after announcing cost-saving initiatives and noting its intention to increase its cash dividend from September. In morning trading, shares spiked 5% to $20.28.

Cost savings currently being implement would benefit adjusted EBITDA by around $30 million in 2015. Initiatives include reducing costs of goods and services and reducing staff by improving process efficiency.

The company also expects to increase its quarterly dividend to $1 a share beginning in the third quarter this year. 

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TheStreet Ratings team rates COVANTA HOLDING CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate COVANTA HOLDING CORP (CVA) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, increase in net income and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CVA's revenue growth has slightly outpaced the industry average of 3.8%. Since the same quarter one year prior, revenues slightly increased by 7.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Services & Supplies industry. The net income increased by 64.0% when compared to the same quarter one year prior, rising from -$25.00 million to -$9.00 million.
  • Net operating cash flow has significantly increased by 66.12% to $103.00 million when compared to the same quarter last year. In addition, COVANTA HOLDING CORP has also vastly surpassed the industry average cash flow growth rate of 4.25%.
  • COVANTA HOLDING CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, COVANTA HOLDING CORP reported lower earnings of $0.35 versus $0.87 in the prior year. This year, the market expects an improvement in earnings ($0.43 versus $0.35).
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