Back to top

Image: Bigstock

Why Is Republic Services (RSG) Down 1.7% Since Last Earnings Report?

Read MoreHide Full Article

A month has gone by since the last earnings report for Republic Services (RSG - Free Report) . Shares have lost about 1.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Republic Services due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Republic Services Q1 Earnings Top Estimates, Revenues Miss

Republic Services reported mixed first-quarter 2021 results wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same.

Adjusted earnings per share of 93 cents outpaced the consensus mark by 8.1% and improved year over year.

Republic Services continued to convert CPI-based contracts to more favorable pricing mechanisms for annual price adjustment during the quarter. It now has roughly $931 million in annual revenues, or 37% of nearly $2.5-billion CPI-based book of business. The company's average recycled-commodity price per ton sold in the first quarter was $133, reflecting a sequential increase of $23 per ton and year-over-year increase of $57 per ton.

Revenues

Quarterly revenues of $2.59 billion lagged the consensus estimate by 0.6% but increased 1.7% year over year. The company’s top line includes a favorable impact of 0.7% from internal growth and 1% from acquisitions.

Revenues in the Collection segment totaled $1.96 billion, up 0.9% year over year. Transfer segment revenues of $146.2 million increased 7.3% year over year. Landfill segment revenues of $313.3 million increased 2.4% year over year. Environmental services segment revenues of $30 million declined 35.9% year over year. Other segment revenues of $149 million grew 18.3% year over year.

Operating Results

Adjusted EBITDA margin of 30.7% improved 270 basis points (bps) from the prior-year quarter.

Operating income was $492.4 million, up 13.7% from the year-ago quarter. Operating margin rose to 18.9% from 16.9% in the year-ago quarter.

Total selling, general and administrative expenses were $265.4 million, declining 4.2% from the year-ago quarter.

Balance Sheet and Cash Flow

Republic Services exited first-quarter 2021 with cash and cash equivalents of $23.2 million compared with $38.2 million at the end of the prior quarter. Long-term debt was $8.59 billion, flat sequentially.

The company generated $661 million of cash from operating activities in the reported quarter. Adjusted free cash flow was $464.2 million.

Dividend Payout

In January 2021, the company paid out $135.5 million of cash dividend to shareholders on record as of Jan 4, 2021. As of Mar 31, 2021, the company’s quarterly payable dividend to shareholders was $135.6 million on record as of Apr 1, 2021. The dividend was paid out on Apr 15, 2021.

The company’s board of directors declared a regular quarterly dividend of 42.5 cents per share for shareholders on record as of Jul 1, 2021. The dividend will be paid out on Jul 15, 2021.

Share Repurchase Activity

During the reported quarter, the company repurchased 0.1 million shares for $12.7 million. As of Mar 31, 2021, the company had $2 billion available under its October 2020 repurchase program.

2021 Guidance

Republic raised its full-year adjusted diluted EPS and adjusted free cash flow guidance. Adjusted EPS is now expected between $3.74 and $3.79, compared with the prior-guided range of $3.65-$3.73. The company now expects to generate $1.35 billion to $1.40 billion of adjusted free cash flow compared with the prior guidance of $1.30 billion to $1.375 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Republic Services has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Republic Services has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Republic Services, Inc. (RSG) - free report >>

Published in