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Republic Services (RSG) Tops Q1 Earnings & Revenue Estimates

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Republic Services, Inc. (RSG - Free Report) reported strong first-quarter 2018 results with earnings and revenues surpassing the Zacks Consensus Estimate.

Earnings per share came in at 74 cents compared with 55 cents in the year-ago quarter. Earnings beat the Zacks Consensus Estimate by 5 cents. The bottom line grew on higher revenues and the U.S. tax reform that decreased the company’s effective tax rate to 23.5% in the reported quarter.

Total first-quarter 2018 revenues of $2,427.5 million beat the Zacks Consensus Estimate of $2,404 million. The figure was up 1.5% year over year.  Top-line growth includes a positive impact of 3.8% internal growth and 1.8% from acquisitions. All the segments recorded impressive performance in the reported quarter.

Internal growth was basically driven by 2.2% increase in average yield, 2% volume growth and increase in energy services revenues by 40 basis points. However, there was a negative impact of fuel recovery fees, which rose by 50 basis points.

During the quarter, Republic Services invested $26 million for tuck-in acquisitions.

Shares barely moved in afterhours trading. We observe that shares of Republic Services have gained 1.3% in the past six months  against the industry’s loss of 0.8%.

 

Revenues by Segment

Collection segment revenues were up 3% year over year to $1,823 million. It accounted for 75% of total revenues.

Transfer and Disposal segment revenues improved 9.5% year over year to $119.7 million. It contributed 4.9% of total revenues.

Landfill segment revenues increased 14.2% year over year to $306.5 million. It accounted for 12.6% of total revenues.

Energy Services segment revenues increased 77.7% year over year to $47.8 million. Segment revenues were driven by an increase in drilling activity in the Permian Basin. It contributed 1.9% of total revenues.

Other segment revenues increased 4.7% to $130.5 million. It accounted for 5.4% of total revenues.

Operating Results

Adjusted EBITDA was $699.4 million, up 7% from the prior-year quarter. Adjusted EBITDA margin of 28.8% marked an improvement of 140 basis points from the year-ago quarter.

Operating income for first-quarter 2018 was $404.2 million compared with $388.1 million in the year-ago quarter. Operating margin was 16.7% compared with 16.2% in the year-ago quarter.

Total selling, general and administrative expenses were $261.2 million compared with $253.5 million in the year-ago quarter.

Balance Sheet and Cash Flow

Republic Services exited first-quarter 2018 with cash and cash equivalents of $62.6 million compared with $83.3 million at the end of December 2017. As of Mar 31, 2018, long-term debt (net of current maturities) was $7,499.7 million compared with $7,480.7 million as of Dec 31, 2017.

The company generated $581.4 million of cash from operating activities in the reported quarter compared with $444.4 million in the year-ago quarter. Adjusted free cash flow was $355.7 million in the reported quarter compared with $240.3 million in the year-ago quarter.

Share Repurchase and Dividend Payout

During the reported quarter, Republic Services returned $350 million to its shareholders through dividends and share repurchases. The company repurchased almost 3.5 million shares at an aggregate cost of $235.6 million and an average price of $66.55 per share. As of Mar 31, 2018, the company had $1.6 billion available under its share repurchase authorization.

Additionally, on the same day of earnings release, the company’s board of directors announced a quarterly cash dividend of 34.5 cents per share, payable on Jul 16 to shareholders of record as of Jul 2.

As of Mar 31, 2018, the company’s quarterly dividend payable was $113.3 million to shareholders of record on Apr 2. The dividend was paid on Apr 16. In January, the company paid a cash dividend of $114.4 million to shareholders of record as of Jan 2, 2018.

Zacks Rank & Upcoming Releases

Republic Services currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Business Services sector are keenly awaiting earnings reports from key players like Gartner, Inc. (IT - Free Report) , The Dun & Bradstreet Corp. (DNB - Free Report) and Broadridge Financial Solutions Inc. (BR - Free Report) . While Garter and Dun & Bradstreet will release first-quarter 2018 results on May 8 and May 9, respectively, Broadridge will report third-quarter fiscal 2018 numbers on May 8.

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