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Republic Services Aims to Improve Operational Efficiency


On Sep 20, Zacks Investment Research updated the research report on waste management services provider, Republic Services, Inc. RSG.

Republic Services Inc. is the second largest domestic, non-hazardous solid waste disposal company in the U.S., in terms of revenues. It provides its services for commercial, industrial, municipal and residential applications through a network of 340 collection centers in 41 states and Puerto Rico. The company owns or operates 201 transfer stations, 8 treatment, recovery and disposal facilities, 12 salt water disposal wells,193 solid waste landfills, 69 landfill gas and renewable energy projects and 67 recycling facilities.

The company has realigned its field support functions by combining two organizational layers and it expects these initiatives to contribute approximately $25 million of annual cost savings from 2018. Over the years, the company has returned significant cash to its shareholders as dividends or share repurchases. Further, it has a history of maintaining a conservative balance sheet and healthy liquidity position.

In addition, the company is focusing on increasing its operational efficiency by adopting compressed natural gas collection vehicles. It is also planning on replacing the rear-loading trucks with automated-side loaders to reduce costs and improve profitability. At the same time, Republic Services is focused on enhancing its operations by streamlining the cost structure, improving revenue quality. The company is also seeking growth through profitable investment opportunities.

However, margin pressure remains a bottleneck for the company. Margins are expected to remain constrained in the next quarters as Republic Services has more exposure to Collection services and less to Disposal services. Typically, the Disposal services generate the highest margins while the Collection services generate the lowest.

Nevertheless, we remain impressed with the strong underlying fundamentals of this Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the industry include The Hackett Group, Inc HCKT, Navigant Consulting Inc. NCI and CRA International Inc. CRAI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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