Republic Services (RSG) Beats On Q4 Earnings, 2018 View Up

Waste management firm Republic Services, Inc. (NYSE:RSG) reported strong fourth-quarter 2017 results, with healthy year-over-year increase in earnings and revenues. GAAP earnings for the quarter were $664.4 million or $1.98 per share compared with $189.5 million or 55 cents per share in the year-ago period. The significant increase in earnings was primarily attributable to favorable impact from the tax act.

Excluding non-recurring items, adjusted earnings were $203.8 million or 61 cents per share compared with $193.8 million or 57 cents per share in the year-earlier quarter, largely driven by top-line growth. Adjusted earnings exceeded the Zacks Consensus Estimate by 4 cents.

For full-year 2017, GAAP earnings were $1,278.4 million or $3.77 per share compared with $612.6 million or $1.78 per share in the year-ago period. Adjusted earnings for the year were $822.2 million or $2.43 per share compared with $763.3 million or $2.22 per share in 2016.

Top-Line Performance

Quarterly revenues improved 7.6% year over year to $2,560 million and topped the Zacks Consensus Estimate of $2,499 million. The year-over-year increase was driven by a 2.4% rise in average yield and a 2.7% jump in volume. Core price increased revenues by 4.1% during the quarter. For 2017, revenues were up 7% to $10,041.5 million.

Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) for the reported quarter was $696 million, resulting in an adjusted EBITDA margin of 27.2% compared with the respective tallies of $664.2 million and 27.9% in the year-ago period.

Segmental Details

Revenues from Collection increased 3.8% year over year to $1,865.2 million as all the sub-segments fared relatively better in the quarter. Revenues from Transfer improved 12.6% to $130 million and Energy Services revenues nearly doubled to $45.7 million from $23.3 million in the year-ago quarter. Revenues from Landfill were up 11.4% to $573.8 million while sales from the Other segment increased 15.6% to $190.1 million.

Balance Sheet & Cash Flow

Cash and cash equivalents at year-end 2017 were $83.3 million while long-term debt (net of current maturities) was $7,480.7 million compared with the respective tallies of $67.8 million and $7,653.1 million in the year-ago period.

Cash from operating activities totaled $1,910.7 million for 2017 compared with $1,847.8 million in 2016. Adjusted free cash flow for 2017 was $933.7 million compared with $885.1 million in the year-ago period.

Share Repurchase

Republic Services has a share repurchase program in place since November 2010. During the fourth quarter, the company repurchased 4.4 million shares under this program for $287.9 million at an average price of $65.55 per share, bringing the tally for 2017 to 10.1 million shares for $644.5 million at an average price of $64.02 per share.

Guidance Up

Republic Services raised its guidance for 2018. It expects adjusted earnings to be within $3.05-$3.10 per share, up from earlier expectations of $2.53-$2.58. Adjusted free cash flow is expected to be in the range of $1,090 million to $1,115 million, up from $925-$950 million projected earlier, as the company is likely to generate a healthy cash flow with diligent execution of operational plans and a realigned operational structure. Revenues are likely to be up 4-4.5% year over year. The company has strong underlying fundamentals and is set to achieve consistent earnings growth while creating significant shareholder value.

Republic Services sports a Zacks Rank #1 (Strong Buy). Some other stocks in the industry worth considering are US Ecology, Inc. (NASDAQ:ECOL) and Waste Management, Inc. (NYSE:WM) , sporting Zacks Rank #1 and Exponent, Inc. (NASDAQ:EXPO) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

US Ecology is currently trading at a forward P/E of 23.9x.

Waste Management has a long-term earnings growth expectation of 9.6%.

Exponent delivered a positive earnings surprise of 12.4% in the trailing four quarters, beating estimates thrice.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>