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Republic Services Focuses on Strategic Operational Growth
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On Apr 3, we issued an updated the research report on waste management services provider, Republic Services, Inc. (RSG - Free Report) .
The company is the second largest domestic non-hazardous solid waste company in the U.S. It provides non-hazardous solid waste disposal services for commercial, industrial, municipal and residential applications through a network of 338 collection companies in 39 states and Puerto Rico. The company owns or operates 200 transfer stations, 193 solid waste landfills, 69 landfill gas and renewable energy projects and 66 recycling facilities. Republic Services manages its operations through four geographic operating segments: Eastern, Midwestern, Southern and Western.
Republic Services has realigned its field support functions by combining two organizational layers. It expects these initiatives to lead to annual cost savings of approximately $25 million from 2018. As part of the realignment program, the company centralized the management structure for recycling operations. The new organizational structure is likely to ensure a clear ownership for the recycling and processing market vertical. It is also transitioning to a fee-based recycling processing model to cover processing costs and generate a healthy ROI (return on investment).
It continues to generate significant free cash flow, which is utilized for increased dividend payment, repurchasing shares and strategic acquisitions. Over the years, the company returned significant cash to its shareholders as dividends or share repurchases. In addition, it has also historically promulgated a conservative balance sheet with a healthy liquidity position. As such, we remain bullish on the company.
With a diligent execution of operational plans, the stock outperformed the Zacks categorized Waste Removal Services industry in the last three months with an average return of 10.5% compared with 6.9% gain for the latter.
However, margin pressure remains a bottleneck for the company as Republic Services has more exposure to Collection services and less to Disposal services. Typically, the Disposal services generate the highest margins and the Collection services generate the lowest. The company’s performance is likely to be hurt by protracted weakness in special waste, industrial volumes and tight municipal budgets. In addition, increased competitive pressure is also a cause of concern for the company. All these factors could further impact the profitability of Republic Services.
Republic Services’ recycling operations process certain recyclable materials for sale, including fibers, aluminum and glass, all of which are subject to significant market price fluctuations. The company is expected to face commodity price headwinds in the future as well, which will likely have a negative year-over-year impact on earnings.
Nevertheless, we remain impressed with the solid growth prospects of this Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the industry include Everi Holdings Inc. (EVRI - Free Report) , WNS (Holdings) Ltd. (WNS - Free Report) and Advanced Disposal Services, Inc. , each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Everi has a long-term earnings growth expectation of 20%.
WNS (Holdings) surpassed earnings estimates twice in the trailing four quarters with a positive surprise of 3.5%.
Advanced Disposal Services topped earnings estimates twice in the trailing four quarters with a positive surprise of 225%. It is currently trading at a forward P/E of 58.7x.
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Republic Services Focuses on Strategic Operational Growth
On Apr 3, we issued an updated the research report on waste management services provider, Republic Services, Inc. (RSG - Free Report) .
The company is the second largest domestic non-hazardous solid waste company in the U.S. It provides non-hazardous solid waste disposal services for commercial, industrial, municipal and residential applications through a network of 338 collection companies in 39 states and Puerto Rico. The company owns or operates 200 transfer stations, 193 solid waste landfills, 69 landfill gas and renewable energy projects and 66 recycling facilities. Republic Services manages its operations through four geographic operating segments: Eastern, Midwestern, Southern and Western.
Republic Services has realigned its field support functions by combining two organizational layers. It expects these initiatives to lead to annual cost savings of approximately $25 million from 2018. As part of the realignment program, the company centralized the management structure for recycling operations. The new organizational structure is likely to ensure a clear ownership for the recycling and processing market vertical. It is also transitioning to a fee-based recycling processing model to cover processing costs and generate a healthy ROI (return on investment).
It continues to generate significant free cash flow, which is utilized for increased dividend payment, repurchasing shares and strategic acquisitions. Over the years, the company returned significant cash to its shareholders as dividends or share repurchases. In addition, it has also historically promulgated a conservative balance sheet with a healthy liquidity position. As such, we remain bullish on the company.
With a diligent execution of operational plans, the stock outperformed the Zacks categorized Waste Removal Services industry in the last three months with an average return of 10.5% compared with 6.9% gain for the latter.
However, margin pressure remains a bottleneck for the company as Republic Services has more exposure to Collection services and less to Disposal services. Typically, the Disposal services generate the highest margins and the Collection services generate the lowest. The company’s performance is likely to be hurt by protracted weakness in special waste, industrial volumes and tight municipal budgets. In addition, increased competitive pressure is also a cause of concern for the company. All these factors could further impact the profitability of Republic Services.
Republic Services’ recycling operations process certain recyclable materials for sale, including fibers, aluminum and glass, all of which are subject to significant market price fluctuations. The company is expected to face commodity price headwinds in the future as well, which will likely have a negative year-over-year impact on earnings.
Nevertheless, we remain impressed with the solid growth prospects of this Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the industry include Everi Holdings Inc. (EVRI - Free Report) , WNS (Holdings) Ltd. (WNS - Free Report) and Advanced Disposal Services, Inc. , each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Everi has a long-term earnings growth expectation of 20%.
WNS (Holdings) surpassed earnings estimates twice in the trailing four quarters with a positive surprise of 3.5%.
Advanced Disposal Services topped earnings estimates twice in the trailing four quarters with a positive surprise of 225%. It is currently trading at a forward P/E of 58.7x.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>