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Republic Services (RSG) Beats on Q1 Earnings, Suspends View

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Republic Services, Inc.(RSG - Free Report) reported solid first-quarter 2020 results wherein earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings per share (EPS) of 77 cents outpaced the consensus mark by 2.7% and improved 5.5% year over year.

Republic Services continued to convert CPI-based contracts to more favorable pricing mechanisms for annual price adjustment. It now has roughly $815 million in annual revenues, or 33% of nearly $2.5 billion CPI-based book of business.

The company's average recycled commodity price per ton sold in the first quarter was $76, reflecting a sequential increase from $10 per ton sold in fourth-quarter 2019.

Further, it launched the $20-million "Committed to Serve" initiative, aimed at helping frontline employees, customers and communities. The company has been honored for the fourth consecutive year as one of the 2020 World's Most Ethical Companies by Ethisphere.

So far this year, shares of Republic Services have lost 9.6%, compared with 25.9% decline of the industry it belongs to and 11.7% decrease of the Zacks S&P 500 composite.



Quarterly revenues of $2.55 billion beat the consensus estimate by 0.4% and increased 3.4% year over year. Positive impact of 2.4% internal growth and 1% impact of acquisitions benefited the top line.

Revenues in the Collection segment totaled $1.94 billion, up 3.3% year over year. Transfer segment revenues of $137 million increased 11.5% year over year. Landfill segment revenues of $306 million increased 3.1% year over year. Environmental services segment revenues of $46.8 million improved 4% year over year. Other segment revenues of $125.2 million decreased 3% year over year.

Operating Results

Adjusted EBITDA of $723 million grew 3.4% year over year. Adjusted EBITDA margin of 28.3% improved 30 basis points (bps) on the back of 40 bps benefit from lower fuel prices and CNG tax credits, which were partially offset by 20 bps headwind from lower recycled commodity prices and 50 bps headwind from an additional workday in the reported quarter.

Operating income was $433 million compared with $422.8 million in the year-ago quarter. Operating margin declined to 16.9% from 17.1% in the year-ago quarter.

Total selling, general and administrative expenses were $277.1 million compared with $266.4 million in the year-ago quarter.

Republic Services, Inc. Price, Consensus and EPS Surprise


Republic Services, Inc. Price, Consensus and EPS Surprise

Republic Services, Inc. price-consensus-eps-surprise-chart | Republic Services, Inc. Quote

Balance Sheet and Cash Flow

Republic Services exited first-quarter 2020 with cash and cash equivalents of $281.6 million compared with $47.1 million at the end of the prior quarter. Long-term debt was $8.95 billion compared with $7.76 billion at the end of the prior quarter.

The company generated $569.5 million of cash from operating activities and spent $346.8 million in capex in the reported quarter. Adjusted free cash flow was $266.7 million.

The company invested $63 million in acquisitions.

Share Repurchase and Dividend Payout

Republic Services returned $228 million to shareholders through dividends and share repurchases during the reported quarter.

In January 2020, the company paid out $129.2 million of cash dividend to shareholders of record as of Jan 2, 2020. As of Mar 31, 2020, the company’s quarterly dividend payable was $128.9 million to shareholders of record as of Apr 1, 2020. The dividend was paid out on Apr 15, 2020.

During the reported quarter, the company repurchased 1.2 million shares at an aggregate cost of $98.8 million at an average cost of $85.06 per share. As of Mar 31, 2020, the company had $605.8 million available under its October 2017 repurchase program.

2020 Guidance

Considering the current uncertainty prevailing in the market on the back of coronavirus outbreak, Republic Services has suspended its full-year 2020 guidance. The company expects to generate more than $1 billion of adjusted free cash flow in 2020, assuming that the GDP improves sequentially in the third and fourth quarter as predicted by economists.

Currently, Republic Services carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Business Services Companies

S&P Global Inc. (SPGI - Free Report) first-quarter 2020 adjusted earnings per share of $2.73 beat the consensus mark by 15.7% and improved 29.4% year over year on the back of revenue growth, benefits of productivity initiatives and reduced business travel.

IQVIA Holdings Inc. (IQV - Free Report) first-quarter 2020 adjusted earnings per share of $1.50 beat the consensus mark by 1.4% but decreased 1.9% on a year-over-year basis. The reported figure lies within the guided range of $1.46-$1.51

Insperity, Inc. (NSP - Free Report) first-quarter 2020 adjusted earnings of $1.70 per share beat the consensus mark by 5.6% but decreased 14.1% year over year. The reported figure matched the higher end of the guided range of $1.61-$1.70.

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