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Republic Services (RSG) Stock Up 17% in a Year: Here's Why

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Shares of Republic Services Inc. RSG have gained 17% over the past year, compared with 13.1% growth of the industry it belongs to and 9.6% rise of the Zacks S&P 500 composite.


Let’s delve deeper into the factors which have contributed to the company’s outperformance.

Consecutive Earnings Beat

Republic Services reported better-than-expected earnings performance in the last four quarters. The company’s consistent initiatives in controlling costs and capitalizing on favorable solid waste management trends have helped it price in excess of cost inflation and improve its operating performance. Further, it has been continuously investing in acquisitions to strengthen its market position. We believe all these strategic business moves have benefited the company’s bottom line.

Upbeat 2020 EPS and Free Cash Flow Guidance

Republic Services raised its 2020 guidance for adjusted earningsand adjusted free cash flow.

The company now expects adjusted earnings in the range of $3.48-$3.53 per share compared with the prior guided range of $3.46-$3.51. The current Zacks Consensus Estimate of $3.50 lies within the guided range.

Adjusted free cash flow is now anticipated to be $1,175-$1,225 million compared with the prior guided range of $1,150 million to $1,200 million.

Internal Growth

Republic Services continues to grow internally with the help of long-term contracts for collection, recycling and disposal of solid waste materials. Such agreements increase its contracted revenue base, thereby strengthening its market position. Further, the company continues to look out for strategic price increase in order to offset increased costs, improve operating margins and enjoy an appropriate return on its substantial investments in vehicles, equipment, landfills, transfer stations and recycling centers. Increasing demand for the recycling of waste products is another major positive for Republic Services’ business.  Notably, revenues included a 1.8% impact of internal growth during 2019.

Zacks Rank & Other Stocks to Consider

Currently, Republic Services carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader Zacks Business Services sector are Interpublic IPG, Omnicom OMC and Genpact G, each carrying a Zacks Rank #2.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term expected EPS (three to five years) growth rate for Interpublic, Omnicom and Genpact is 4.5%, 5.6% and 11.9%, respectively.

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