Republic Services, Inc. (RSG - Free Report) reported solid second-quarter 2020 results wherein earnings and revenues surpassed the Zacks Consensus Estimate.
Adjusted earnings per share of 81 cents outpaced the consensus mark by 35% and improved 3% year over year.
Republic Services continued to convert CPI-based contracts to more favorable pricing mechanisms for annual price adjustment. It now has roughly $850 million in annual revenues, or 34% of nearly $2.5 billion CPI-based book of business.
The company's average recycled-commodity price per ton sold in the second quarter was $101, reflecting a sequential increase from $25 per ton sold in first-quarter 2020 and year-over-year increase from $23 per ton.
So far this year, shares of Republic Services have gained 2% against 15.1% decline of the industry it belongs to. The Zacks S&P 500 composite has risen 4% in the said time frame.
Quarterly revenues of $2.45 billion beat the consensus estimate by 2.5% but decreased 5.8% year over year. Unfavorable impact of 6.5% internal growth was partially offset by 70 basis points positive impact of acquisitions.
Revenues in the Collection segment totaled $1.83 billion, down 6% year over year. Transfer segment revenues of $150.1 million decreased 0.7% year over year. Landfill segment revenues of $315.7 million decreased 6.4% year over year. Environmental services segment revenues of $30.1 million declined 26.2% year over year. Other segment revenues of $128.6 million grew 0.3% year over year.
Adjusted EBITDA of $726 million was almost flat year over year. Adjusted EBITDA margin of 29.6% grew 170 basis points (bps) from the prior-year quarter. This included a 110 bps benefit from higher recycled-commodity prices and lower fuel costs and 130 bps headwind from $31 million of coronavirus-related costs.
Operating income was $395.2 million compared with $437.4 million in the year-ago quarter. Operating margin declined to 16.1% from 16.7% in the year-ago quarter.
Total selling, general and administrative expenses were $262.1 million compared with $264.5 million in the year-ago quarter.
Balance Sheet and Cash Flow
Republic Services exited second-quarter 2020 with cash and cash equivalents of $269.7 million compared with $281.6 million at the end of the prior quarter. Long-term debt was $8.59 billion compared with $8.95 billion at the end of the prior quarter.
The company generated $764 million of cash from operating activities and spent $307.9 million in capex in the reported quarter. Adjusted free cash flow was $476.3 million.
The company invested $61 million in acquisitions in the reported quarter.
Share Repurchase and Dividend Payout
In April 2020, the company paid out $128.9 million of cash dividend to shareholders on record as of Apr 1, 2020. As of Jun 30, 2020, the company’s quarterly payable dividend was $129 million to shareholders on record as of Jul 1, 2020. The dividend was paid out on Jul 15, 2020.
During the reported quarter, the company did not repurchase any shares. As of Jun 30, 2020, the company had $605.8 million available under its October 2017 repurchase program.
Republic Services expects to generate $1.1 billion to $1.175 billion of adjusted free cash flow for the full year. It also plans to invest $600-$650 million in acquisitions for the full year.
Currently, Republic Services carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Business Services Companies
Equifax (EFX - Free Report) reported better-than-expected second-quarter 2020 adjusted earnings of $1.60 per share, whichnbeat the Zacks Consensus Estimate by 22.1% and improved 14.3% on a year-over-year basis. The reported figure exceeded the guided range of 78-88 cents.
IQVIA Holdings (IQV - Free Report) reported second-quarter 2020 adjusted earnings per share of $1.18, which beat the consensus mark by 12.4% but decreased 22.9% on a year-over-year basis. The reported figure exceeded the guided range of $1.00-$1.09.
Robert Half (RHI - Free Report) reported second-quarter 2020 earnings of 41 cents per share that beat the consensus mark by 17% but were down 58% year over year.
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