Republic Services Inc. RSG reported mixed second-quarter 2019 results wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.
Adjusted earnings per share of 79 cents outpaced the consensus mark by a penny and increased 8.2% year over year, attributable to a 4 cents benefit from lower-than-expected effective tax rate, which was partially offset by a 3 cents non-cash tax-related charge.
So far this year, shares of Republic Services have gained 20.8%, compared with 25.5% rise of the industry it belongs to and 18.8% rise of the Zacks S&P 500 composite.
Quarterly revenues of $2.60 billion lagged the consensus estimate by $18.9 million but increased 3.5% year over year, driven by strong pricing across the company’s collection, disposal and recycling processing businesses. Top-line growth also includes a positive impact of 2.8% internal growth and 70 basis points impact of acquisitions.
Revenues in the Collection segment totaled $1.95 billion, up 2.9% year over year. It contributed 75% to total revenues.
Transfersegment revenues of $151.1 million increased 10.3% year over year. It accounted for 6% of total revenues.
Landfill segment revenues of $337.5 million increased 7% year over year. It contributed 13% to total revenues.
Energy services segment revenues of $40.8 million declined 18.7% year over year. It accounted for 2% of total revenues.
Other segment revenues of $128.2 million increased 4.4% year over year. It contributed 5% to total revenues.
Adjusted EBITDA came in at $726 million and adjusted EBITDA margin was 27.9% (up 50 basis points year over year).
Operating income was $437.4 million compared with $408.2 million in the year-ago quarter. Operating margin rose to 16.8% from 16.2% in the year-ago quarter. Total selling, general and administrative expenses were $264.5 million compared with $252.9 million in the year-ago quarter.
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 second-quarter 2019 with cash and cash equivalents of $72.5 million compared with $68 million at the end of the prior quarter. Long-term debt was $6.88 billion compared with $6.80 billion at the end of the prior quarter.
The company generated $581.9 million of cash from operating activities and spent $315 million in capex in the reported quarter. Adjusted free cash flow was $272.1 million. The company spent $129 million on acquisitions during the reported quarter.
Share Repurchase and Dividend Payout
Republic Services returned $213 million to shareholders through dividends and share repurchases during the reported quarter.
The company repurchased 1.1 million shares at an aggregate cost of $91.9 million and at average cost of $82.67 per share during the reported quarter. As of Jun 30, 2019, the company had $900.7 million available under its share repurchase authorization.
In April 2019, the company paid $120.7 million of cash dividend to shareholders of record as of Apr 1. The company paid out quarterly dividend totaling $120.2 million to shareholders of record as of Jul 1 on Jul 15, 2019.
Concurrent with the earnings release, the company’s board of directors approved an 8% dividend hike, thereby raising the quarterly dividend to 40.5 cents per share from 37.5 cents. The raised dividend will be paid out on Oct 15, 2019 to shareholders of record as of Oct 1.
Republic Services reaffirmed its 2019 guidance for adjusted earnings and adjusted free cash flow, despite additional headwinds from lower recycled commodity prices. The company continues to anticipate adjusted earnings in the range of $3.23-$3.28. The current Zacks Consensus Estimate of $3.23 is in line with the lower end of the guided range.
Adjusted free cash flow is anticipated in the range of $1,125-$1,175 million. Effective tax rate is expected to be approximately 24%. The company now plans to invest approximately $550 million for acquisitions compared with $300 million guided earlier.
Zacks Rank & Upcoming Releases
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.
Investors interested in the broader Zacks Business Services sector are awaiting second-quarter 2019 earnings of key players like Insperity NSP, Waste Connections WCN and Verisk Analytics VRSK. While Insperity and Waste Connections are slated to report on Jul 29, Verisk Analytics is scheduled to release results on Jul 30.
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