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Republic Services, Inc.RSG reported mixed third-quarter 2020 results wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same.
Adjusted earnings per share of 81 cents outpaced the consensus mark by 35% and improved year over year.
Republic Services continued to convert CPI-based contracts to more favorable pricing mechanisms for annual price adjustment. It now has roughly $855 million in annual revenues, or 34% of nearly $2.5 billion CPI-based book of business. The company's average recycled-commodity price per ton sold in the third quarter was $99, reflecting a year-over-year increase of $27 per ton. The company has been honored as a Great Place to Work for the fourth consecutive year.
So far this year, shares of Republic Services have gained 6.6% against 11.6% decline of the industry it belongs to. The Zacks S&P 500 composite has risen 9.6% in the said time frame.
Quarterly revenues of $2.57 billion lagged the consensus estimate by 0.5% and decreased 2.8% year over year. The company’s top line was unfavorably impacted by 2.7% internal growth and 0.1% acquisitions.
Revenues in the Collection segment totaled $1.92 billion, down 2.4% year over year. Transfer segment revenues of $161.5 million increased 4.3% year over year. Landfill segment revenues of $333.9 million decreased 1.7% year over year. Environmental services segment revenues of $24.1 million declined 58.3% year over year. Other segment revenues of $131.5 million grew 4.7% year over year.
Adjusted EBITDA of $781 million was up $41 million from the prior-year quarter. Adjusted EBITDA margin of 30.3% improved 230 basis points (bps) from the prior-year quarter. This included a 70-bps benefit from higher recycled commodity prices and lower fuel costs.
Operating income was $447.9 million compared with $467.8 million in the year-ago quarter. Operating margin declined to 17.4% from 17.7% in the year-ago quarter.
Total selling, general and administrative expenses were $256.1 million compared with $275.4 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 third-quarter 2020 with cash and cash equivalents of $406.4 million compared with $269.7 million at the end of the prior quarter. Long-term debt of $8.59 billion was flat sequentially.
The company generated $575.5 million of cash from operating activities in the reported quarter. Adjusted free cash flow was $366.1 million. The company invested $30 million in acquisitions in the reported quarter.
In July 2020, the company paid out $129 million of cash dividend to shareholders on record as of Jul 1, 2020. As of Sep 30, 2020, the company’s quarterly payable dividend was $135.4 million to shareholders on record as of Oct 1, 2020. The dividend was paid out on Oct 15, 2020.
The company’s board of directors declared a regular quarterly dividend of 42.5 cents per share for shareholders on record as of Jan 4, 2021. The dividend will be paid out on Jan 15, 2021.
Share Repurchase Activity
During the reported quarter, the company did not repurchase any shares. As of Sep 30, 2020, the company had $605.8 million available under its October 2017 repurchase program.
Concurrent with the earnings release, the company’s board of directors approved $2 billion for share repurchases, effective from Jan 1, 2021 till Dec 31, 2023. As of Sep 30, 2020, the company had $606 million available under its prior authorizationand this continues till Dec 31, 2020.
Republic Services reaffirmed its full-year 2020 adjusted EPS guidance. Adjusted EPS is expected to be in the range of $3.37-$3.40. The Zacks Consensus Estimate of $3.17 lies below the guidance.
The company now anticipates to generate $1.15 billion to $1.20 billion of adjusted free cash flow for the full year compared with the prior guidance of $1.1-$1.175 billion. This guidance assumes continued gradual improvement in economic activity through the remainder of the year.
It also plans to invest $850-$900 million in acquisitions for the full year.
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.
Performance of Other Business Services Companies
Equifax EFX reported better-than-expected third-quarter 2020 results, with adjusted earnings of $1.87 per share beating the Zacks Consensus Estimate by 16.2% and improving 26.4% on a year-over-year basis. The reported figure exceeded the guided range of $1.30-$1.40.
The Interpublic Group of Companies IPG reported better-than-expected third-quarter 2020 adjusted earnings of 53 cents per share, which beat the Zacks Consensus Estimate by 43.2% and improved 8.2% on a year-over-year basis.
IQVIA Holdings IQV reported solid third-quarter 2020 adjusted earnings per share of $1.63, which beat the consensus mark by 8% and improved 1.9% on a year-over-year basis. The reported figure was above the guided range of $1.47-$1.55.
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