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Republic Services (RSG) Beats on Q4 Earnings, 2018 View Up

Zacks

Waste management firm Republic Services, Inc. RSG reported strong fourth-quarter 2017 results, with healthy year-over-year increase in earnings and revenues. GAAP earnings for the quarter were $664.4 million or $1.98 per share compared with $189.5 million or 55 cents per share in the year-ago period. The significant increase in earnings was primarily attributable to favorable impact from the tax act.

Excluding non-recurring items, adjusted earnings were $203.8 million or 61 cents per share compared with $193.8 million or 57 cents per share in the year-earlier quarter, largely driven by top-line growth. Adjusted earnings exceeded the Zacks Consensus Estimate by 4 cents.

For full-year 2017, GAAP earnings were $1,278.4 million or $3.77 per share compared with $612.6 million or $1.78 per share in the year-ago period. Adjusted earnings for the year were $822.2 million or $2.43 per share compared with $763.3 million or $2.22 per share in 2016.

Republic Services, Inc. Price, Consensus and EPS Surprise

Republic Services, Inc. Price, Consensus and EPS Surprise | Republic Services, Inc. Quote


Top-Line Performance

Quarterly revenues improved 7.6% year over year to $2,560 million and topped the Zacks Consensus Estimate of $2,499 million. The year-over-year increase was driven by a 2.4% rise in average yield and a 2.7% jump in volume. Core price increased revenues by 4.1% during the quarter. For 2017, revenues were up 7% to $10,041.5 million.

Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) for the reported quarter was $696 million, resulting in an adjusted EBITDA margin of 27.2% compared with the respective tallies of $664.2 million and 27.9% in the year-ago period.

Segmental Details

Revenues from Collection increased 3.8% year over year to $1,865.2 million as all the sub-segments fared relatively better in the quarter. Revenues from Transfer improved 12.6% to $130 million and Energy Services revenues nearly doubled to $45.7 million from $23.3 million in the year-ago quarter. Revenues from Landfill were up 11.4% to $573.8 million while sales from the Other segment increased 15.6% to $190.1 million.

Balance Sheet & Cash Flow

Cash and cash equivalents at year-end 2017 were $83.3 million while long-term debt (net of current maturities) was $7,480.7 million compared with the respective tallies of $67.8 million and $7,653.1 million in the year-ago period.

Cash from operating activities totaled $1,910.7 million for 2017 compared with $1,847.8 million in 2016. Adjusted free cash flow for 2017 was $933.7 million compared with $885.1 million in the year-ago period.

Share Repurchase

Republic Services has a share repurchase program in place since November 2010. During the fourth quarter, the company repurchased 4.4 million shares under this program for $287.9 million at an average price of $65.55 per share, bringing the tally for 2017 to 10.1 million shares for $644.5 million at an average price of $64.02 per share.

Guidance Up

Republic Services raised its guidance for 2018. It expects adjusted earnings to be within $3.05-$3.10 per share, up from earlier expectations of $2.53-$2.58. Adjusted free cash flow is expected to be in the range of $1,090 million to $1,115 million, up from $925-$950 million projected earlier, as the company is likely to generate a healthy cash flow with diligent execution of operational plans and a realigned operational structure. Revenues are likely to be up 4-4.5% year over year. The company has strong underlying fundamentals and is set to achieve consistent earnings growth while creating significant shareholder value.

Republic Services sports a Zacks Rank #1 (Strong Buy). Some other stocks in the industry worth considering are US Ecology, Inc. ECOL and Waste Management, Inc. WM, sporting Zacks Rank #1 and Exponent, Inc. EXPO, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

US Ecology is currently trading at a forward P/E of 23.9x.

Waste Management has a long-term earnings growth expectation of 9.6%.

Exponent delivered a positive earnings surprise of 12.4% in the trailing four quarters, beating estimates thrice.

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