We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Republic Services Rides on Organic Growth Amid Debt Woes
Read MoreHide Full Article
Republic Services, Inc. (RSG - Free Report) has gained 0.6% over the past year against 17% decline of the industry it belongs to.
The company has an expected long-term (three to five years) earnings per share growth rate of 9.9%. Moreover, earnings are expected to register 15.5% growth in 2021.
Let’s take a sneak peek into the factors, which have been impacting the company’s performance.
Republic Services continues to grow internally with the help of long-term contracts for the collection, recycling and disposal of solid waste materials. Such agreements increase the company’s contracted revenue base, thereby strengthening its market position. Further, the company continues to look out for strategic price increases 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, in 2019, revenue growth included a positive impact of 1.8% internal growth.
The company is focused on increasing its operational efficiency by shifting to compressed natural gas (CNG) collection vehicles and converting rear-loading trucks to automated-side loaders, which reduce cost and improve profitability. The company is focused on enhancing its operations by streamlining the cost structure, improving revenue quality and seeking growth through profitable investment opportunities. In 2019, almost 13% of the replacement vehicle purchases were CNG vehicles.
The company is highly optimistic about the usage of CNG vehicles, which will help it compete effectively on grounds of maintaining a clean environment. Despite higher expenses, CNG reduces the company’s overall fleet operating costs through lower fuel expenses. As of Dec 31, 2019, Republic Services operated 39 CNG fueling stations. All these factors offer a solid investment proposition for the company.
Debt Woe Stays
Republic Services has adebt-laden balance sheet. Total debt at the end of first-quarter 2020 was $8.98 billion, up from $8.69 billion at the end of the prior quarter. The debt-to-capital ratio of 52.4 was higher than the previous quarter’s 48.9. An increase in debt to capitalization ratio indicates higher risk of insolvency in challenging times.
Further, the company’s cash and cash equivalent of $282 million at the end of the first quarter was well below this debt level, underscoring that the company doesn’t have enough cash to meet this debt burden. The cash level, however, can meet the short-term debt of $25 million.
Zacks Rank and Stocks to Consider
Republic Services currently carries a Zacks Rank #3 (Hold).
The long-term expected earnings per share (three to five years) growth rate for DocuSign, SPS Commerce and SailPoint is 47%, 15% and 15%, respectively.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
Image: Bigstock
Republic Services Rides on Organic Growth Amid Debt Woes
Republic Services, Inc. (RSG - Free Report) has gained 0.6% over the past year against 17% decline of the industry it belongs to.
The company has an expected long-term (three to five years) earnings per share growth rate of 9.9%. Moreover, earnings are expected to register 15.5% growth in 2021.
Let’s take a sneak peek into the factors, which have been impacting the company’s performance.
Internal Growth & Operational Efficiency Initiatives
Republic Services continues to grow internally with the help of long-term contracts for the collection, recycling and disposal of solid waste materials. Such agreements increase the company’s contracted revenue base, thereby strengthening its market position. Further, the company continues to look out for strategic price increases 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, in 2019, revenue growth included a positive impact of 1.8% internal growth.
The company is focused on increasing its operational efficiency by shifting to compressed natural gas (CNG) collection vehicles and converting rear-loading trucks to automated-side loaders, which reduce cost and improve profitability. The company is focused on enhancing its operations by streamlining the cost structure, improving revenue quality and seeking growth through profitable investment opportunities. In 2019, almost 13% of the replacement vehicle purchases were CNG vehicles.
The company is highly optimistic about the usage of CNG vehicles, which will help it compete effectively on grounds of maintaining a clean environment. Despite higher expenses, CNG reduces the company’s overall fleet operating costs through lower fuel expenses. As of Dec 31, 2019, Republic Services operated 39 CNG fueling stations. All these factors offer a solid investment proposition for the company.
Debt Woe Stays
Republic Services has a debt-laden balance sheet. Total debt at the end of first-quarter 2020 was $8.98 billion, up from $8.69 billion at the end of the prior quarter. The debt-to-capital ratio of 52.4 was higher than the previous quarter’s 48.9. An increase in debt to capitalization ratio indicates higher risk of insolvency in challenging times.
Further, the company’s cash and cash equivalent of $282 million at the end of the first quarter was well below this debt level, underscoring that the company doesn’t have enough cash to meet this debt burden. The cash level, however, can meet the short-term debt of $25 million.
Zacks Rank and Stocks to Consider
Republic Services currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are DocuSign (DOCU - Free Report) , SPS Commerce (SPSC - Free Report) and SailPoint Technologies Holdings, Inc. . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term expected earnings per share (three to five years) growth rate for DocuSign, SPS Commerce and SailPoint is 47%, 15% and 15%, respectively.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>