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Republic Services (RSG) Beats on Q3 Earnings, Ups '19 EPS View

Zacks Equity Research

Republic Services Inc.RSG reported mixed third-quarter 2019 results wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.

Adjusted earnings per share of 91 cents outpaced the consensus mark by 6 cents and increased 11% year over year.

So far this year, shares of Republic Services have gained 23.2%, compared with 21.7% rise of the industry it belongs to and 19.9% rise of the Zacks S&P 500 composite.

 

Revenues

Quarterly revenues of $2.65 billion lagged the consensus estimate by $48 million but increased 3.5% year over year. A positive impact of 2% internal growth and 1.2% impact of acquisitions benefited the top line.

Revenues in the Collection segment totaled $1.97 billion, up 3.2% year over year. Transfer segment revenues of $154.9 million increased 8.8% year over year. Landfill segment revenues of $339.8 million increased 2.5% year over year. It contributed 13% to total revenues. Environmental services segment revenues of $57.8 million improved 12.2% year over year. Other segment revenues of $125.6 million decreased 5.2% year over year.

Republic Services, Inc. Revenue (TTM)

 

Republic Services, Inc. Revenue (TTM)

Republic Services, Inc. revenue-ttm | Republic Services, Inc. Quote

Operating Results

Adjusted EBITDA came in at $742 million and adjusted EBITDA margin was 28% (down 40 basis points year over year).

Operating income was $467.8 million compared with $440.3 million in the year-ago quarter. Operating margin rose to 17.7% from 17.2% in the year-ago quarter. Total selling, general and administrative expenses were $275.4 million compared with $260.9 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 third-quarter 2019 with cash and cash equivalents of $55.6 million compared with $72.5 million at the end of the prior quarter. Long-term debt was $7.71 billion compared with $6.88 billion at the end of the previous quarter.

The company generated $651.3 million of cash from operating activities and capex was $294.1 million in the reported quarter. Adjusted free cash flow was $371.7 million. The company spent $275 million on acquisitions during the reported quarter.

Share Repurchase and Dividend Payout

Republic Services returned $271 million to shareholders through dividends and share repurchases during the reported quarter.

The company repurchased 1.7 million shares at an aggregate cost of $150.5 million and at average cost of $86.88 per share during the reported quarter. As of Sep 30, 2019, the company had $750.2 million available under its October 2017share repurchase authorization.

In July 2019, the company paid out $120.2 million of cash dividend to shareholders of record as of Jul 1. The company paid out quarterly dividend totaling $129.3 million to shareholders of record as of Oct 1 on Oct 15, 2019.

Concurrent with the earnings release, the company’s board of directors declared a quarterly cash dividend of 40.5 per share, payable on Jan 15, 2020, for shareholders of record as of Jan 2, 2020.

2019 Guidance

Republic Services raised its 2019 guidance for adjusted earnings while reaffirmed the same for adjusted free cash flow.

The company now expects adjusted earnings in the range of $3.28-$3.30 per share compared with the prior guided range of $3.23-$3.28. The current Zacks Consensus Estimate of $3.24 is below the guided range.

Adjusted free cash flow is anticipated in the range of $1,125-$1,175 million

2020 Guidance

Republic Services provided a preliminary guidance for 2020. The company expects adjusted diluted earnings per share between $3.46 and $3.51. The Zacks Consensus Estimate of $3.56 lies above the guided range.

Adjusted free cash flow is anticipated in the range of $1,150 million to $1,200 million.

Zacks Rank & Upcoming Releases

Currently, Republic Services carries a Zacks Rank #3 (Hold). 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 third-quarter 2019 earnings of key players like Fiserv FISV, ICF International ICFI and FLEETCOR Technologies FLT, each scheduled to release results on Nov 6.

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