Republic Services, Inc. RSG is benefiting from its solid operating performance and investor-favorite steps.
RSG’s earnings and revenues for 2022 are expected to improve 16% and 19% respectively, from the corresponding year-ago reported figures.
Factors That Augur Well
Republic Services is focused on increasing its operational excellence by shifting to compressed natural gas (CNG) collection vehicles and converting rear-loading trucks to automated-side loaders. This, in turn, will reduce cost and improve profitability of RSG.
RSG is focusing on enhancing its operations by streamlining the cost structure, improving the revenue quality and seeking growth through profitable investment opportunities. In 2021, almost 13% of the replacement vehicle purchases were CNG vehicles. Republic Services is highly optimistic about the usage of CNG vehicles, which will help it compete effectively on the grounds of maintaining a clean environment. As of Dec 31, 2021, Republic Services operated 40 CNG fuelling stations.
We are also impressed with Republic Services’ consistent efforts in rewarding its shareholders through dividend payments and share repurchases. In 2021, 2020 and 2019, RSG paid $552.6 million, $522.5 million and $491.2 million in dividends and repurchased shares worth $252.2 million, $98.8 million and $399.4 million, respectively. Such moves indicate a company’s commitment to creating value for its shareholders and underline its confidence in its business. These initiatives buoy investors’ optimism on the stock and positively impact earnings per share.
A Key Risk
Republic Services' liquidity position is concerning. RSG’s current ratio (a measure of liquidity) at the end of third-quarter 2022 was 0.70, lower than its prior quarter's figure of 0.73. Decreasing current ratio is not a favorable development. Moreover, a current ratio of less than 1 is not desirable as it implies a company's insufficiency of liquid assets to cover its short-term liabilities.
Zacks Rank and Stocks to Consider
Republic Services currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Zacks Business Services sector are Booz Allen Hamilton Holding Corporation BAH, Paychex, Inc. PAYX and Cross Country Healthcare, Inc. CCRN.
Booz Allen carries a Zacks Rank #2 (Buy) at present. BAH has a long-term earnings growth expectation of 8.9%.
Booz Allen delivered a trailing four-quarter earnings surprise of 8.8%, on average.
Paychex presently carries a Zacks Rank of 2. PAYX has a long-term earnings growth expectation of 7.5%.
Paychex delivered a trailing four-quarter earnings surprise of 8.6%, on average.
Cross Country Healthcare is currently Zacks #2 Ranked. CCRN has a long-term earnings growth expectation of 6%.
CCRN delivered a trailing four-quarter earnings surprise of 10.1%, on average.
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