Republic Services (RSG) Stock Up 27.3% in a Year: Here's Why
Shares of Republic Services, Inc. RSG have gained 27.3% over the past year, outperforming 10.5% growth of the industry it belongs to.
Let’s delve deeper into factors which have contributed to the company’s outperformance.
Consecutive Earnings Beat
Republic Services reported better-than-expected earnings performance in the past seven quarters. The company’s bottom line continued to benefit from improvement in operational efficiency, growth in adjusted free cash flow, higher recycled commodity prices and lower fuel costs.
Notably, the company's average recycled-commodity price per ton sold in the fourth quarter was $110, reflecting a year-over-year increase of $44 per ton.
Shareholder Friendly Moves
Republic Services’ consistent efforts in rewarding its shareholders through dividend payments and share repurchases are appreciable. During 2020, 2019 and 2018, the company paid $522.5 million, $491.2 million and $461.8 million in dividends and repurchased shares worth $98.8 million, $399.4 million and $736.9 million, respectively. Such moves indicate the company’s commitment to create value for shareholders and also underline its confidence in its business. These initiatives not only instill investors’ confidence, but also positively impact earnings per share.
Operational Efficiency Moves
Republic Services remains focused on increasing its operational efficiency by shifting to compressed natural gas (“CNG”) collection vehicles and converting rear-loading trucks to automated-side loaders, which will reduce cost and improve profitability. The company is focused on enhancing its operations by streamlining the cost structure, improving revenue quality and seeking growth through profitable investment opportunities. In 2020, almost 13% of the replacement vehicle purchases were CNG vehicles. Meanwhile, the company is highly optimistic about the usage of CNG vehicles, which will help it compete effectively on grounds of maintaining a clean environment. Despite higher expenses, CNG reduces the company’s overall fleet-operating costs through lower fuel expenses. As of Dec 31, 2020, Republic Services operated 38 CNG fueling stations. All these factors make the company a solid investment proposition.
Zacks Rank and Stocks to Consider
Republic Services currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Servicessector are Interpublic IPG, Omnicom OMC and Gartner IT each carrying a Zacks Rank #2 (Buy).
The long-term expected earnings per share (three to five years) growth rate for Interpublic, Omnicom and Gartner is 2.4%, 4.7% and 13.5%, respectively.
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