It has been about a month since the last earnings report for Republic Services, Inc. (RSG - Free Report) . Shares have added about 5% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is RSG 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 Beats Q3 Earnings, Issues 2018 View
Republic Services reported strong third-quarter 2017 results, with healthy year-over-year increase in earnings and revenues. GAAP earnings for the quarter were $223.2 million or 66 cents per share compared with $85.6 million or 25 cents per share in the year-ago period. The year-over-year increase in earnings was primarily driven by higher revenues.
Excluding non-recurring items, adjusted earnings were $225.2 million or 67 cents per share compared with $212.6 million or 62 cents per share in the year-earlier quarter. Adjusted earnings exceeded the Zacks Consensus Estimate by 4 cents.
Quarterly revenues improved 6.3% year over year to $2,562 million and topped the Zacks Consensus Estimate of $2,533 million. The year-over-year increase was driven by a 2.5% rise in average yield and a 1.6% jump in volume. Core price increased revenues by 4.1% during the quarter.
Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) for the reported quarter was $708.6 million, resulting in an adjusted EBITDA margin of 28% compared with the respective tallies of $666.4 million and 28.3% in the year-ago period.
Revenues from Collection increased 3.8% year over year to $1,882.1 million as all the sub-segments fared relatively better in the reported quarter. Revenues from Transfer improved 7.2% to $134.8 million. Energy Services revenues more than doubled to $40 million from $17.3 million in the year-ago quarter. Revenues from Landfill were up 10.3% to $323.4 million while sales from the Other segment increased 14% to $181.7 million.
Balance Sheet & Cash Flow
Cash and cash equivalents at the quarter end were $63.9 million while long-term debt (net of current maturities) was $7,152 million.
Cash from operating activities totaled $1,381.5 million for the first nine months of 2017 compared with $1,359.6 million in the prior-year period. Adjusted free cash flow for the first nine months of 2017 was $605.6 million compared with $575.9 million in the year-ago period.
Republic Services has a share repurchase program in place since November 2010. During the third quarter, the company repurchased 1.8 million shares under this program for $119.3 million at an average price of $64.88 per share. The company had $95.1 million worth of shares remaining under the share repurchase authorization at the quarter end. In addition, the board of directors approved another $2 billion share repurchase authorization which extends through Dec 31, 2020.
Preliminary Guidance for 2018
Republic Services offered a preliminary guidance for 2018, per which adjusted earnings are expected to be within $2.53-$2.58 per share. Adjusted free cash flow is expected to be in a range of $925 million to $950 million as the company is likely to generate a healthy cash flow with diligent execution of operational plans and a realigned operational structure. It has strong underlying fundamentals and is set to achieve consistent earnings growth while creating significant shareholder value.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
At this time, RSG has an average Growth Score of C. Its Momentum is doing a bit better with a B. The stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Our style scores indicate that the stock is more suitable for momentum investors than growth investors.
Estimates have been trending upward for the stock and the magnitude of this revision looks promising. It comes with little surprise RSG has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.