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Why Is Republic Services (RSG) Up 11.1% Since Last Earnings Report?
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A month has gone by since the last earnings report for Republic Services (RSG - Free Report) . Shares have added about 11.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Republic Services due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Republic Services reported solid first-quarter 2020 results wherein earnings and revenues surpassed the Zacks Consensus Estimate.
Adjusted earnings per share (EPS) of 77 cents outpaced the consensus mark by 2.7% and improved 5.5% year over year.
Republic Services continued to convert CPI-based contracts to more favorable pricing mechanisms for annual price adjustment. It now has roughly $815 million in annual revenues, or 33% of nearly $2.5 billion CPI-based book of business.
The company's average recycled commodity price per ton sold in the first quarter was $76, reflecting a sequential increase from $10 per ton sold in fourth-quarter 2019.
Further, it launched the $20-million "Committed to Serve" initiative, aimed at helping frontline employees, customers and communities. The company has been honored for the fourth consecutive year as one of the 2020 World's Most Ethical Companies by Ethisphere.
Revenues
Quarterly revenues of $2.55 billion beat the consensus estimate by 0.4% and increased 3.4% year over year. Positive impact of 2.4% internal growth and 1% impact of acquisitions benefited the top line.
Revenues in the Collection segment totaled $1.94 billion, up 3.3% year over year. Transfer segment revenues of $137 million increased 11.5% year over year. Landfill segment revenues of $306 million increased 3.1% year over year. Environmental services segment revenues of $46.8 million improved 4% year over year. Other segment revenues of $125.2 million decreased 3% year over year.
Operating Results
Adjusted EBITDA of $723 million grew 3.4% year over year. Adjusted EBITDA margin of 28.3% improved 30 basis points (bps) on the back of 40 bps benefit from lower fuel prices and CNG tax credits, which were partially offset by 20 bps headwind from lower recycled commodity prices and 50 bps headwind from an additional workday in the reported quarter.
Operating income was $433 million compared with $422.8 million in the year-ago quarter. Operating margin declined to 16.9% from 17.1% in the year-ago quarter.
Total selling, general and administrative expenses were $277.1 million compared with $266.4 million in the year-ago quarter.
Balance Sheet and Cash Flow
Republic Services exited first-quarter 2020 with cash and cash equivalents of $281.6 million compared with $47.1 million at the end of the prior quarter. Long-term debt was $8.95 billion compared with $7.76 billion at the end of the prior quarter.
The company generated $569.5 million of cash from operating activities and spent $346.8 million in capex in the reported quarter. Adjusted free cash flow was $266.7 million.
The company invested $63 million in acquisitions.
Share Repurchase and Dividend Payout
Republic Services returned $228 million to shareholders through dividends and share repurchases during the reported quarter.
In January 2020, the company paid out $129.2 million of cash dividend to shareholders of record as of Jan 2, 2020. As of Mar 31, 2020, the company’s quarterly dividend payable was $128.9 million to shareholders of record as of Apr 1, 2020. The dividend was paid out on Apr 15, 2020.
During the reported quarter, the company repurchased 1.2 million shares at an aggregate cost of $98.8 million at an average cost of $85.06 per share. As of Mar 31, 2020, the company had $605.8 million available under its October 2017 repurchase program.
2020 Guidance
Considering the current uncertainty prevailing in the market on the back of coronavirus outbreak, Republic Services has suspended its full-year 2020 guidance. The company expects to generate more than $1 billion of adjusted free cash flow in 2020, assuming that the GDP improves sequentially in the third and fourth quarter as predicted by economists.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Republic Services has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Republic Services has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Republic Services (RSG) Up 11.1% Since Last Earnings Report?
A month has gone by since the last earnings report for Republic Services (RSG - Free Report) . Shares have added about 11.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Republic Services due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Republic Services Supasses Q1 Earnings & Revenue Estimates
Republic Services reported solid first-quarter 2020 results wherein earnings and revenues surpassed the Zacks Consensus Estimate.
Adjusted earnings per share (EPS) of 77 cents outpaced the consensus mark by 2.7% and improved 5.5% year over year.
Republic Services continued to convert CPI-based contracts to more favorable pricing mechanisms for annual price adjustment. It now has roughly $815 million in annual revenues, or 33% of nearly $2.5 billion CPI-based book of business.
The company's average recycled commodity price per ton sold in the first quarter was $76, reflecting a sequential increase from $10 per ton sold in fourth-quarter 2019.
Further, it launched the $20-million "Committed to Serve" initiative, aimed at helping frontline employees, customers and communities. The company has been honored for the fourth consecutive year as one of the 2020 World's Most Ethical Companies by Ethisphere.
Revenues
Quarterly revenues of $2.55 billion beat the consensus estimate by 0.4% and increased 3.4% year over year. Positive impact of 2.4% internal growth and 1% impact of acquisitions benefited the top line.
Revenues in the Collection segment totaled $1.94 billion, up 3.3% year over year. Transfer segment revenues of $137 million increased 11.5% year over year. Landfill segment revenues of $306 million increased 3.1% year over year. Environmental services segment revenues of $46.8 million improved 4% year over year. Other segment revenues of $125.2 million decreased 3% year over year.
Operating Results
Adjusted EBITDA of $723 million grew 3.4% year over year. Adjusted EBITDA margin of 28.3% improved 30 basis points (bps) on the back of 40 bps benefit from lower fuel prices and CNG tax credits, which were partially offset by 20 bps headwind from lower recycled commodity prices and 50 bps headwind from an additional workday in the reported quarter.
Operating income was $433 million compared with $422.8 million in the year-ago quarter. Operating margin declined to 16.9% from 17.1% in the year-ago quarter.
Total selling, general and administrative expenses were $277.1 million compared with $266.4 million in the year-ago quarter.
Balance Sheet and Cash Flow
Republic Services exited first-quarter 2020 with cash and cash equivalents of $281.6 million compared with $47.1 million at the end of the prior quarter. Long-term debt was $8.95 billion compared with $7.76 billion at the end of the prior quarter.
The company generated $569.5 million of cash from operating activities and spent $346.8 million in capex in the reported quarter. Adjusted free cash flow was $266.7 million.
The company invested $63 million in acquisitions.
Share Repurchase and Dividend Payout
Republic Services returned $228 million to shareholders through dividends and share repurchases during the reported quarter.
In January 2020, the company paid out $129.2 million of cash dividend to shareholders of record as of Jan 2, 2020. As of Mar 31, 2020, the company’s quarterly dividend payable was $128.9 million to shareholders of record as of Apr 1, 2020. The dividend was paid out on Apr 15, 2020.
During the reported quarter, the company repurchased 1.2 million shares at an aggregate cost of $98.8 million at an average cost of $85.06 per share. As of Mar 31, 2020, the company had $605.8 million available under its October 2017 repurchase program.
2020 Guidance
Considering the current uncertainty prevailing in the market on the back of coronavirus outbreak, Republic Services has suspended its full-year 2020 guidance. The company expects to generate more than $1 billion of adjusted free cash flow in 2020, assuming that the GDP improves sequentially in the third and fourth quarter as predicted by economists.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Republic Services has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Republic Services has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.