RSG Remains Stable

Republic Services, Inc. (RSG - Snapshot Report) posted third-quarter earnings of 39 cents per share, beating the Zacks Consensus Estimate of 37 cents. However, EPS was down 20%, compared to the prior-year quarter.
 
Revenues stood at $2,073.5 million, compared to $834.0 million in the third quarter of 2008. The current quarter includes financial results of Allied Waste Industries, Inc., which merged with Republic Services in December 2008. On a combined company basis (assuming the companies were merged in January 2008), internal growth in the third quarter was a negative 12.8%. A positive contribution of 2.8% from core price was offset by a 10.1% decline in core volume, a 1.9% negative contribution from commodity pricing, and a 3.6% decline in fuel recovery fees.
 
The company is progressing well on business integration. Through the third quarter, the company achieved annual run rate synergies of approximately $140 million. This is well ahead of the targeted run rate of $125 million. The company now expects to achieve run rate synergies of $145 million by the end of 2009. Republic Services expects total run rate synergies of $165–$175 million by the end of 2010.
 
The company generated free cash flow of $493 million year-to-date and reduced its total debt by $647 million. Given the significant debt reduction and progress on merger integration, Standard & Poor’s and Fitch raised their outlook on the company’s long-term credit rating during the quarter.
 
Republic Services raised its full-year earnings outlook. The company now expects EPS in the range of $1.46–$1.48, compared to the previous guidance of $1.43–$1.45. The increased guidance reflects greater merger synergies and the company’s ability to adjust its cost structure. The company maintained its free cash flow guidance of $700 million to $725 million for the full year.