A month has gone by since the last earnings report for Republic Services, Inc. (RSG - Free Report) . Shares have added about 6.8% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it 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 catalysts.
Republic Services Beats Q4 Earnings, Updates View
Republic Services reported relatively healthy fourth-quarter 2016 results with GAAP earnings of $189.5 million or $0.55 per share compared with $172.3 million or $0.49 per share in the year-ago quarter. The year-over-year increase in earnings was primarily attributable to higher revenues.
Excluding non-recurring items, adjusted earnings for the reported quarter were $193.8 million or $0.57 per share, compared with $175.0 million or $0.50 per share in the year-earlier quarter. Adjusted earnings for the reported quarter exceeded the Zacks Consensus Estimate by $0.02.
For full-year 2016, the company recorded GAAP earnings of $612.6 million or $1.78 per share, compared with $749.9 million or $2.13 per share in 2015. Adjusted earnings for 2016 improved to $763.3 million or $2.22 per share from $722.3 million or $2.06 per share in 2015.
Quarterly revenues improved 3.9% year over year to $2,379.1 million and beat the Zacks Consensus Estimate of $2,355 million. The year-over-year increase in revenues was driven by a 2.2% rise in average yield and a 0.5% increase in volume. Core price increased revenues by 3.5% during the quarter. For 2016, revenues improved to $9,387.7 million from $9,115 million in 2015.
Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) for the reported quarter was $664.2 million, resulting in an adjusted EBITDA margin of 27.9% compared with the respective tallies of $622.9 million and 27.2% in the year-ago period.
Revenues from Collection increased 2.7% year over year to $1,796.2 million as the Commercial and Industrial sub-segments fared relatively better in the reported quarter. Revenues from Transfer improved 6.1% year over year to $115.5 million. Revenues from Landfill were up 1.9% to $279.6 million, while sales from the Other segment increased 22.3% year over year to $164.5 million.
By the end of the reported quarter, about 18% of the total fleet was operating on natural gas. Approximately 74% of the residential fleet was automated and 92% was certified under the standardized maintenance program.
Balance Sheet & Cash Flow
Cash and cash equivalents at year-end 2016 were $67.8 million, while long-term debt (net of current maturities) was $7,653.1 million compared with respective tallies of $32.4 million and $7,527.4 million in the prior-year period.
Cash from operating activities totaled $1,847.8 million for 2016 compared with $1,679.7 million in the prior-year period. Adjusted free cash flow for 2016 and 2015 was $885.1 million and $813.4 million, respectively.
Share Repurchase & Dividend
Republic Services has a share repurchase program in place since Nov 2010. During the fourth quarter, the company repurchased 1.7 million shares under this program for $88.1 million at an average price of $51.08 per share. The company returned $820 million to shareholders through share repurchases and dividends in 2016.
2017 Guidance Updated
Based on healthy quarterly results and expectations that recycled commodity prices will remain at current levels for 2017, management updated the guidance for 2017. The company expects its adjusted earnings to be in a range of $2.32–$2.36 per share, up from the preliminary guidance of $2.31–$2.36. Adjusted free cash flow is expected to be in the range of $875–$900 million, while revenues are expected to be up 4.5–5.0% year over year.
Republic Services is likely to generate a healthy cash flow in the future with diligent execution of operational plans and a realigned operational structure. The company has strong underlying fundamentals and is set to achieve consistent earnings growth while creating significant shareholder value.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There have been two upward revisions for the current quarter compared to two downward.
At this time, Republic Services's stock has an average Growth Score of 'C', a grade with the same score on the momentum front. Following the exact same course, the stock was allocated also 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.
Based on our scores, the stock is equally suitable for value, growth, and momentum investors.
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.