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RSG or WM: Which Stock is the Better Pick Post Q4 Earnings?
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The earnings season is well past the halfway mark with about 362 S&P 500 companies having reported results till Feb 14, 2018. Various analysis and comparisons are being done by industry peers to gauge the underlying metrics and relative performance. Let us perform a similar analysis of two leading players in the Waste Disposal sector to pick the best investment option based on the fourth-quarter 2017 earnings scorecard.
Fourth-Quarter Earnings
Republic Services, Inc. (RSG - Free Report) reported strong results, with healthy year-over-year increase in earnings and revenues. GAAP earnings for the quarter were $664.4 million or $1.98 per share compared with $189.5 million or 55 cents per share in the year-ago period. The significant increase in earnings was primarily attributable to favorable impact from the tax act. Excluding non-recurring items, adjusted earnings were $203.8 million or 61 cents per share compared with $193.8 million or 57 cents per share in the year-earlier quarter, largely driven by top-line growth. Adjusted earnings exceeded the Zacks Consensus Estimate by 4 cents.
Quarterly revenues improved 7.6% year over year to $2,560 million and topped the Zacks Consensus Estimate of $2,499 million. The year-over-year increase was driven by a 2.4% rise in average yield and a 2.7% jump in volume. Core price increased revenues by 4.1% during the quarter. Republic Services carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Waste Management, Inc. (WM - Free Report) reported healthy year-over-year increase in revenues and earnings in the quarter. Adjusted earnings were 85 cents per share compared with 75 cents in the year-earlier quarter. The bottom line surpassed the Zacks Consensus Estimate of 83 cents. The year-over-year increase in adjusted earnings was aided by a healthy rise in revenues despite higher operating expenses. GAAP earnings for the quarter were $903 million or $2.06 per share compared with $335 million or 75 cents per share in the year-ago quarter.
Total revenues came in at $3,652 million compared with $3,460 million in the year-ago quarter. It surpassed the Zacks Consensus Estimate of $3,565 million. The increase was primarily driven by strong yield and volume growth in the Collection and Disposal business. Waste Management carries a Zacks Rank #2.
Guidance
Republic Services raised its guidance for 2018. It expects adjusted earnings to be within $3.05-$3.10 per share, up from earlier expectations of $2.53-$2.58. Adjusted free cash flow is expected to be in the range of $1,090 million to $1,115 million, up from $925-$950 million projected earlier, as the company is likely to generate a healthy cash flow with diligent execution of operational plans and a realigned operational structure. Revenues are likely to be up 4-4.5% year over year. The company has strong underlying fundamentals and is set to achieve consistent earnings growth while creating significant shareholder value.
Concurrent with the earnings release, the company provided its outlook for 2018. It expects internal revenues from collection and disposal business to grow minimum 2% while that from volume are expected lie between 2% and 2.2%. Free cash flow for 2018 is expected to be $1.95-$2.05 billion. Adjusted earnings are likely to be between $3.97 and $4.05 per share.
Price Performance
In the last three months, Republic Services has underperformed the industry with an average return of 2.8% compared with 3.2% gain for the latter. Waste Management has outperformed the industry with an average return of 4.2% during the same time frame.
Estimate Revisions
Last month, Republic Services’ current-quarter estimates increased to 70 cents per share from 58 cents while that for the current year increased from $2.64 to $3.08.
Waste Management’s current-quarter and current-year estimates remained steady at 83 cents and $3.20, respectively.
To Sum Up
Based on the current scenario, although there is not much to choose from as the stocks seem to match on most counts, Republic Services seems to have trumped Waste Management on the basis of positive estimate revisions, although it has slightly underperformed the industry, and stands out as a better investment option.
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RSG or WM: Which Stock is the Better Pick Post Q4 Earnings?
The earnings season is well past the halfway mark with about 362 S&P 500 companies having reported results till Feb 14, 2018. Various analysis and comparisons are being done by industry peers to gauge the underlying metrics and relative performance. Let us perform a similar analysis of two leading players in the Waste Disposal sector to pick the best investment option based on the fourth-quarter 2017 earnings scorecard.
Fourth-Quarter Earnings
Republic Services, Inc. (RSG - Free Report) reported strong results, with healthy year-over-year increase in earnings and revenues. GAAP earnings for the quarter were $664.4 million or $1.98 per share compared with $189.5 million or 55 cents per share in the year-ago period. The significant increase in earnings was primarily attributable to favorable impact from the tax act. Excluding non-recurring items, adjusted earnings were $203.8 million or 61 cents per share compared with $193.8 million or 57 cents per share in the year-earlier quarter, largely driven by top-line growth. Adjusted earnings exceeded the Zacks Consensus Estimate by 4 cents.
Quarterly revenues improved 7.6% year over year to $2,560 million and topped the Zacks Consensus Estimate of $2,499 million. The year-over-year increase was driven by a 2.4% rise in average yield and a 2.7% jump in volume. Core price increased revenues by 4.1% during the quarter. Republic Services carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Waste Management, Inc. (WM - Free Report) reported healthy year-over-year increase in revenues and earnings in the quarter. Adjusted earnings were 85 cents per share compared with 75 cents in the year-earlier quarter. The bottom line surpassed the Zacks Consensus Estimate of 83 cents. The year-over-year increase in adjusted earnings was aided by a healthy rise in revenues despite higher operating expenses. GAAP earnings for the quarter were $903 million or $2.06 per share compared with $335 million or 75 cents per share in the year-ago quarter.
Total revenues came in at $3,652 million compared with $3,460 million in the year-ago quarter. It surpassed the Zacks Consensus Estimate of $3,565 million. The increase was primarily driven by strong yield and volume growth in the Collection and Disposal business. Waste Management carries a Zacks Rank #2.
Guidance
Republic Services raised its guidance for 2018. It expects adjusted earnings to be within $3.05-$3.10 per share, up from earlier expectations of $2.53-$2.58. Adjusted free cash flow is expected to be in the range of $1,090 million to $1,115 million, up from $925-$950 million projected earlier, as the company is likely to generate a healthy cash flow with diligent execution of operational plans and a realigned operational structure. Revenues are likely to be up 4-4.5% year over year. The company has strong underlying fundamentals and is set to achieve consistent earnings growth while creating significant shareholder value.
Concurrent with the earnings release, the company provided its outlook for 2018. It expects internal revenues from collection and disposal business to grow minimum 2% while that from volume are expected lie between 2% and 2.2%. Free cash flow for 2018 is expected to be $1.95-$2.05 billion. Adjusted earnings are likely to be between $3.97 and $4.05 per share.
Price Performance
In the last three months, Republic Services has underperformed the industry with an average return of 2.8% compared with 3.2% gain for the latter. Waste Management has outperformed the industry with an average return of 4.2% during the same time frame.
Estimate Revisions
Last month, Republic Services’ current-quarter estimates increased to 70 cents per share from 58 cents while that for the current year increased from $2.64 to $3.08.
Waste Management’s current-quarter and current-year estimates remained steady at 83 cents and $3.20, respectively.
To Sum Up
Based on the current scenario, although there is not much to choose from as the stocks seem to match on most counts, Republic Services seems to have trumped Waste Management on the basis of positive estimate revisions, although it has slightly underperformed the industry, and stands out as a better investment option.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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