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High Collection Revenues to Aid Republic (RSG) Q3 Earnings?
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Premier waste management firm Republic Services, Inc. (RSG - Free Report) is scheduled to report third-quarter 2017 results after the closing bell on Nov 2. The company is likely to report higher revenues from the Collection segment that accounts for more than 73% of total revenues, due to improved demand for its products.
Whether this will lead to higher earnings for the quarter remains to be seen.
Top-Line Improvement
Republic Services has significantly expanded its product offerings in the e-commerce platform to address the evolving needs of the customers. This low-cost sales channel is likely to aid the company in the quarter. In addition, the company improved the capabilities and functionality of the customer portal and mobile app. These value-driven interactive features are likely to lead to incremental orders and higher revenues in the to-be-reported quarter.
At the same time, Republic Services is focused on increasing operational efficiency by converting its fleet to compressed natural gas collection vehicles and modifying rear-loading trucks to automated-side loaders, which will reduce costs and improve profitability. The company is realigning its field support functions by combining two organizational layers. It expects these initiatives to contribute approximately $25 million of annual cost savings from 2018.
As part of the realignment program, the company centralized the management structure for recycling operations. The new organizational structure is likely to ensure a clear ownership for the recycling and processing market vertical. Republic Services is also transitioning to a fee-based recycling processing model to cover processing costs and generate a healthy ROI (return on investments).
The Zacks Consensus Estimate for Collection segment revenues is currently pegged at $1,883 million, up from $1,814 million reported in the year-ago quarter. Revenues from the Landfill segment are expected to be $318 million compared with reported revenues of $293 million in the year-earlier quarter. Revenues from the Transfer and Disposal Services segment are anticipated to be $136 million, up from $126 million reported in the year-ago quarter.
Other Key Factors
However, margin pressure remains a bottleneck for the company. Margins are expected to remain constrained in the impending quarter as Republic Services has more exposure to Collection services and less to Disposal services. Typically, Disposal services generate the highest margins and Collection services generate the lowest. The company’s performance is also likely to be hurt by protracted weakness in special waste, industrial volumes and tight municipal budgets. In addition, increased competitive pressure remains a concern for the company.
Our proven model does not conclusively show that Republic Services is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and Zacks Consensus Estimate, is +0.32%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Republic Services has a Zacks Rank #4 (Sell).
Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Mylan N.V. has an Earnings ESP of +3.92% and a Zacks Rank #2.
TELUS Corporation (TU - Free Report) has an Earnings ESP of +4.35% and a Zacks Rank #3.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
High Collection Revenues to Aid Republic (RSG) Q3 Earnings?
Premier waste management firm Republic Services, Inc. (RSG - Free Report) is scheduled to report third-quarter 2017 results after the closing bell on Nov 2. The company is likely to report higher revenues from the Collection segment that accounts for more than 73% of total revenues, due to improved demand for its products.
Whether this will lead to higher earnings for the quarter remains to be seen.
Top-Line Improvement
Republic Services has significantly expanded its product offerings in the e-commerce platform to address the evolving needs of the customers. This low-cost sales channel is likely to aid the company in the quarter. In addition, the company improved the capabilities and functionality of the customer portal and mobile app. These value-driven interactive features are likely to lead to incremental orders and higher revenues in the to-be-reported quarter.
At the same time, Republic Services is focused on increasing operational efficiency by converting its fleet to compressed natural gas collection vehicles and modifying rear-loading trucks to automated-side loaders, which will reduce costs and improve profitability. The company is realigning its field support functions by combining two organizational layers. It expects these initiatives to contribute approximately $25 million of annual cost savings from 2018.
As part of the realignment program, the company centralized the management structure for recycling operations. The new organizational structure is likely to ensure a clear ownership for the recycling and processing market vertical. Republic Services is also transitioning to a fee-based recycling processing model to cover processing costs and generate a healthy ROI (return on investments).
The Zacks Consensus Estimate for Collection segment revenues is currently pegged at $1,883 million, up from $1,814 million reported in the year-ago quarter. Revenues from the Landfill segment are expected to be $318 million compared with reported revenues of $293 million in the year-earlier quarter. Revenues from the Transfer and Disposal Services segment are anticipated to be $136 million, up from $126 million reported in the year-ago quarter.
Other Key Factors
However, margin pressure remains a bottleneck for the company. Margins are expected to remain constrained in the impending quarter as Republic Services has more exposure to Collection services and less to Disposal services. Typically, Disposal services generate the highest margins and Collection services generate the lowest. The company’s performance is also likely to be hurt by protracted weakness in special waste, industrial volumes and tight municipal budgets. In addition, increased competitive pressure remains a concern for the company.
Our proven model does not conclusively show that Republic Services is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and Zacks Consensus Estimate, is +0.32%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Republic Services, Inc. Price and EPS Surprise
Republic Services, Inc. Price and EPS Surprise | Republic Services, Inc. Quote
Zacks Rank: Republic Services has a Zacks Rank #4 (Sell).
Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
KEMET Corporation (KEM - Free Report) has an Earnings ESP of +7.46% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Mylan N.V. has an Earnings ESP of +3.92% and a Zacks Rank #2.
TELUS Corporation (TU - Free Report) has an Earnings ESP of +4.35% and a Zacks Rank #3.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>