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Republic Services (RSG) Beats Q3 Earnings, Issues 2018 View

Zacks Equity Research
Updated

Waste management firm Republic Services, Inc. RSG reported strong third-quarter 2017 results, with healthy year-over-year increase in earnings and revenues. GAAP earnings for the quarter were $223.2 million or 66 cents per share compared with $85.6 million or 25 cents per share in the year-ago period. The year-over-year increase in earnings was primarily driven by higher revenues.

Excluding non-recurring items, adjusted earnings were $225.2 million or 67 cents per share compared with $212.6 million or 62 cents per share in the year-earlier quarter. Adjusted earnings exceeded the Zacks Consensus Estimate by 4 cents.

Republic Services, Inc. Price, Consensus and EPS Surprise

 

Republic Services, Inc. Price, Consensus and EPS Surprise | Republic Services, Inc. Quote

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Top-Line Performance

Quarterly revenues improved 6.3% year over year to $2,562 million and topped the Zacks Consensus Estimate of $2,533 million. The year-over-year increase was driven by a 2.5% rise in average yield and a 1.6% jump in volume. Core price increased revenues by 4.1% during the quarter.

Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) for the reported quarter was $708.6 million, resulting in an adjusted EBITDA margin of 28% compared with the respective tallies of $666.4 million and 28.3% in the year-ago period.

Segmental Details

Revenues from Collection increased 3.8% year over year to $1,882.1 million as all the sub-segments fared relatively better in the reported quarter. Revenues from Transfer improved 7.2% to $134.8 million. Energy Services revenues more than doubled to $40 million from $17.3 million in the year-ago quarter. Revenues from Landfill were up 10.3% to $323.4 million while sales from the Other segment increased 14% to $181.7 million.

Balance Sheet & Cash Flow

Cash and cash equivalents at the quarter end were $63.9 million while long-term debt (net of current maturities) was $7,152 million.

Cash from operating activities totaled $1,381.5 million for the first nine months of 2017 compared with $1,359.6 million in the prior-year period. Adjusted free cash flow for the first nine months of 2017 was $605.6 million compared with $575.9 million in the year-ago period.

Share Repurchase

Republic Services has a share repurchase program in place since November 2010. During the third quarter, the company repurchased 1.8 million shares under this program for $119.3 million at an average price of $64.88 per share. The company had $95.1 million worth of shares remaining under the share repurchase authorization at the quarter end. In addition, the board of directors approved another $2 billion share repurchase authorization which extends through Dec 31, 2020.

Preliminary Guidance for 2018

Republic Services offered a preliminary guidance for 2018, per which adjusted earnings are expected to be within $2.53-$2.58 per share. Adjusted free cash flow is expected to be in a range of $925 million to $950 million as the company is likely to generate a healthy cash flow with diligent execution of operational plans and a realigned operational structure. It has strong underlying fundamentals and is set to achieve consistent earnings growth while creating significant shareholder value.

Republic Services currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Forrester Research, Inc. FORR, ManTech International Corporation MANT and Syntel, Inc. SYNT, each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Forrester Research has a long-term earnings growth expectation of 12%. It delivered a positive earnings surprise of 30.4% in the trailing four quarters, beating estimates in each.

ManTech has a long-term earnings growth expectation of 8%. It pulled off a positive earnings surprise of 5.5% in the trailing four quarters, beating estimates thrice.

Syntel has a long-term earnings growth expectation of 10%. It delivered a positive earnings surprise of 10.7% in the trailing four quarters, beating estimates in each.  

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