Republic Services (RSG) Misses on Q3 Earnings by a Whisker - Analyst Blog

Republic Services, Inc (RSG) reported GAAP net income of $185.8 million or 52 cents per share in third-quarter 2014 versus $171.4 million or 47 cents per share in the year-ago quarter. The year-over-year rise in GAAP net income was primarily driven by higher revenues.

Adjusted earnings for the reported quarter improved to $186.0 million or 52 cents per share versus $198.2 million or 55 cents in the year-earlier quarter. Adjusted earnings for the reported quarter missed the Zacks Consensus Estimate by a penny.
 

 

Revenues improved 4.6% to $2,264.1 million in the reported quarter from $2,165.4 million in the prior-year period. The year-over-year increase was driven by a 1.4% rise in average yield, a 2.1% increase in volume, higher fuel recovery fees of 0.2%, higher recycling commodity revenues of 0.2% and accretive acquisitions (net of divestitures) of 0.7%. Revenues for third-quarter 2014 exceeded the Zacks Consensus Estimate of $2,246 million.

Adjusted EBITDA was $637.8 million (28.2% of revenues) versus $638.2 million (29.5%) in the year-ago quarter.

Segment Performance

Revenues from the Collection segment increased 4.2% year over year to $1,718.5 million as all its sub-segments, namely Residential, Commercial, and Industrial fared relatively better. The Transfer segment revenues increased 1.0% year over year to $109.5 million. Revenues from the Landfill segment were up 7.3% to $296.4 million, while sales from the Other segment climbed 6.6% year over year to $139.7 million.

Financial Update

Cash and cash equivalents at quarter end were $113.0 million, while long-term debt (net of current maturities) stood at $7,020.0 million.

Cash from operating activities totaled $1,101.6 for the first nine months of 2014 compared with $1,137.2 million in the prior-year period. Adjusted free cash flow for the first nine months of the year was $432.5 million versus $469.0 million in the prior-year period.

Republic Services paid a quarterly dividend of $99.5 million to stockholders of record at the close of business on Oct 1, 2014. Also, the company declared a quarterly dividend of 28 cents per share for stockholders of record on Jan 2, 2015 payable on Jan 15, 2015.

Share Repurchase

Republic Services has a share repurchase program in place since Nov 2010. By the end of third-quarter 2014, the company had repurchased 43.5 million shares under this program for $1,316.5 million at an average price of $30.28 per share, including 0.6 million shares bought back for $21.4 million at $38.60 per share during the reported quarter.

Outlook

Republic Services updated its full year 2014 adjusted earnings per share guidance to the range of $1.93 to $1.94 from the prior range of $1.93 to $1.98. Republic Services also updated its 2014 adjusted free cash flow guidance to the range of $675 million to $690 million from $675 million and $725 million expected previously.

The company also provided its preliminary outlook for 2015 in which earnings per share are expected to be in a range of $2.02 to $2.06. Adjusted free cash flow is expected to be in a range of $725 million to $750 million.

Republic Services is committed to its long-term strategy, which involves the maintenance of a healthy cash flow and a disciplined approach to cash utilization. The company has strong underlying fundamentals and is set to achieve consistent earnings growth and create shareholder value.

Republic Services currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look now include Waste Connections Inc (WCN), Exponent Inc (EXPO) and Information Services Group, Inc (III), each carrying a Zacks Rank #2 (Buy).
 

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