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Can Republic Services (RSG) Beat Q3 Earnings Estimates?
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Premier waste management firm Republic Services, Inc. (RSG - Free Report) is scheduled to report third-quarter 2016 results, after the closing bell on Oct 27.
In the last reported quarter, adjusted earnings of the company were in line with the Zacks Consensus Estimate. Notably, for the trailing four quarters, the stock posted an average positive surprise of 1.04%, beating estimates twice. Let’s see how things are shaping up for this announcement.
Key Factors to Consider
Republic Services’ well structured business model has proved to be its strength, having driven healthy volumes, earnings, free cash flow and solid return on invested capital and cash returns to shareholders over a considerable period of time. Meanwhile, the company has made commendable progress with its multi-year strategic initiatives, which are expected to reduce costs. Republic Services’ cost structure is closely aligned to its “waste indices” which in turn has proved to be a major positive.
The company is currently focusing on increasing its operational efficiency by adopting compressed natural gas collection vehicles. It is also planning to replace rear-loading trucks with automated-side loaders to reduce costs and improve profitability. At the same time, Republic Services is focused on enhancing its operations by streamlining the cost structure, improving revenue quality and seeking growth through profitable investment opportunities.
In addition, the company is realigning its field support functions by combining two organizational layers. It expects these initiatives to result in approximately $25 million in annual cost savings from 2018. Over the years, the company has returned significant cash to its shareholders as dividends and/or share repurchases. Further, it has a history of maintaining a conservative balance sheet and healthy liquidity position.
However, margin pressure remains a bottleneck for the company. Margins are expected to remain constrained over the next few quarters as Republic Services has more exposure to Collection services and less to Disposal services. Typically, Disposal services generate the highest margins while Collection services clock the lowest margins.
Republic Services’ recycling operations process certain recyclable materials for sale, including fibers, aluminum and glass, all of which are subject to significant market price fluctuations. The company is expected to face commodity price headwinds in the future as well, which will likely have a negative year-over-year impact on earnings.
Earnings Whispers
Our proven model does not conclusively show that Republic Services is likely to beat earnings this quarter as it lacks the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Republic Services currently carries Zacks Rank #3. Although this increases the predictive power of ESP, the company’s 0.00% ESP makes an earnings prediction uncertain.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Navigant Consulting Inc. , with an Earnings ESP of +6.90% and a Zacks Rank #3.
MarketAxess Holdings, Inc. (MKTX - Free Report) , with an Earnings ESP of +1.30% and a Zacks Rank #3.
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Can Republic Services (RSG) Beat Q3 Earnings Estimates?
Premier waste management firm Republic Services, Inc. (RSG - Free Report) is scheduled to report third-quarter 2016 results, after the closing bell on Oct 27.
In the last reported quarter, adjusted earnings of the company were in line with the Zacks Consensus Estimate. Notably, for the trailing four quarters, the stock posted an average positive surprise of 1.04%, beating estimates twice. Let’s see how things are shaping up for this announcement.
Key Factors to Consider
Republic Services’ well structured business model has proved to be its strength, having driven healthy volumes, earnings, free cash flow and solid return on invested capital and cash returns to shareholders over a considerable period of time. Meanwhile, the company has made commendable progress with its multi-year strategic initiatives, which are expected to reduce costs. Republic Services’ cost structure is closely aligned to its “waste indices” which in turn has proved to be a major positive.
The company is currently focusing on increasing its operational efficiency by adopting compressed natural gas collection vehicles. It is also planning to replace rear-loading trucks with automated-side loaders to reduce costs and improve profitability. At the same time, Republic Services is focused on enhancing its operations by streamlining the cost structure, improving revenue quality and seeking growth through profitable investment opportunities.
In addition, the company is realigning its field support functions by combining two organizational layers. It expects these initiatives to result in approximately $25 million in annual cost savings from 2018. Over the years, the company has returned significant cash to its shareholders as dividends and/or share repurchases. Further, it has a history of maintaining a conservative balance sheet and healthy liquidity position.
REPUBLIC SVCS Price and EPS Surprise
REPUBLIC SVCS Price and EPS Surprise | REPUBLIC SVCS Quote
However, margin pressure remains a bottleneck for the company. Margins are expected to remain constrained over the next few quarters as Republic Services has more exposure to Collection services and less to Disposal services. Typically, Disposal services generate the highest margins while Collection services clock the lowest margins.
Republic Services’ recycling operations process certain recyclable materials for sale, including fibers, aluminum and glass, all of which are subject to significant market price fluctuations. The company is expected to face commodity price headwinds in the future as well, which will likely have a negative year-over-year impact on earnings.
Earnings Whispers
Our proven model does not conclusively show that Republic Services is likely to beat earnings this quarter as it lacks the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Republic Services currently carries Zacks Rank #3. Although this increases the predictive power of ESP, the company’s 0.00% ESP makes an earnings prediction uncertain.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Amazon.com, Inc. (AMZN - Free Report) , with an Earnings ESP of +10.47% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Navigant Consulting Inc. , with an Earnings ESP of +6.90% and a Zacks Rank #3.
MarketAxess Holdings, Inc. (MKTX - Free Report) , with an Earnings ESP of +1.30% and a Zacks Rank #3.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>