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Republic Services' (RSG) Acquisitions Aid Despite Debt Burden

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·3-min read
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Shares of Republic Services, Inc.’s RSG have had an impressive run on the bourses over the past year. The stock has appreciated 23.6% over the past year against, outperforming the 24% decline of the industry it belongs to.

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Zacks Investment Research


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RSG recently reported impressive first-quarter 2022 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Adjusted earnings per share of $1.14 outpaced the consensus mark by 8.6% and rallied 16.3% year over year. Quarterly revenues of $2.97 billion surpassed the consensus estimate by 2.4% and increased 14.3% year over year.

How is Republic Services Doing?

Republic Services’ revenue growth is backed by the favorable impact of acquisition revenues and internal growth. In first-quarter 2022, RSG witnessed a favorable impact of 10.5% from internal growth and 3.9% from acquisitions.

RSG focuses on increasing its operational efficiency by shifting to compressed natural gas (CNG) collection vehicles and converting rear-loading trucks to automated-side loaders, which will reduce cost and improve profitability. Republic Services aims to enhance its operations by streamlining the cost structure, improving its revenue quality and seeking growth through profitable investment opportunities.

In 2021, almost 13% of RSG’s replacement vehicle purchases were CNG vehicles. Republic Services is highly optimistic about the usage of CNG vehicles, which will help it compete effectively when it comes to maintaining a clean environment. Despite higher expenses, CNG reduces RSG’s overall fleet-operating costs through lower fuel expenses. As of Dec 31, 2021, RSG operated 40 CNG fueling stations.

Republic Services is consistent in rewarding its shareholders through dividend payments and share repurchases. In 2021, 2020 and 2019, RSG had repurchased shares worth $252.2 million, $98.8 million and $399.4 million, respectively. RSG paid out dividends worth $552.6 million, $522.5 million and $491.2 million in 2021, 2020 and 2019, respectively. Such moves indicate RSG’s commitment to creating a shareholder value and underline its assurance in its business. These initiatives not only instill investors’ confidence in the stock but also drive the earnings per share.

Republic Services’ cash and cash equivalent balance of $39 million at the end of first-quarter 2022 was well below the long-term debt level of $9.61 billion. RSG’s current ratio (a measure of liquidity) at the end of the reported quarter was 0.75, lower than its industry's current ratio of 0.90. Decreasing current ratio is not desirable as it implies difficulties in meeting near-term debt obligations

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 Business Services sector are Cross Country Healthcare CCRN, Gartner IT and Avis Budget CAR, each sporting a Zacks Rank #1 at present.

Cross Country Healthcare has an expected earnings growth rate of 54.2% for the current year. CCRN has a trailing four-quarter earnings surprise of 29.2%, on average.

Cross Country Healthcare has a long-term earnings growth rate of 6.9%.

Gartner’s shares have risen 6.9% in the past year. IT delivered a trailing four-quarter earnings surprise of 24.2%, on average.

The Zacks Consensus Estimate for Gartner's earnings in the current year has moved up 13.6% in the past 90 days.

Avis Budget has an expected earnings growth rate of 59.8% for the current year. CAR delivered a trailing four-quarter earnings surprise of 102.1%, on average.

Avis Budget has a long-term earnings growth rate of 19.4%.


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Avis Budget Group, Inc. (CAR) : Free Stock Analysis Report
 
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