Republic Services Pricing Strength Continues to be Evident

Image Source: Republic Services

By Brian Nelson, CFA

Republic Services (RSG) reported mixed third quarter results October 29, with revenue coming in a bit light relative to the consensus forecast, while non-GAAP earnings per share outpaced what the Street had been looking for. The trash taker posted 6.5% revenue growth with 4.2 percentage points coming from organic means, while 2.3 percentage points came from acquisitions. Adjusted earnings per share came in at $1.81, beating consensus expectations by $0.20. Management had the following to say about the quarter:

Our strong performance during the third quarter is a direct result of executing our strategic priorities. By pricing ahead of cost inflation and effective cost management, we delivered double-digit growth in adjusted EBITDA and EPS, and expanded adjusted EBITDA margin by more than 200 basis points. Our results continue to demonstrate the power of a well-designed strategy in driving sustainable growth and the value created for all stakeholders.

Republic Services generated $2.9 billion in cash flow from operations through the first nine months of the year, and adjusted free cash flow of $1.74 billion. The garbage hauler continues to price its business effectively, with average yield advancing 4.6% and total price increasing 4.4% in the quarter. Waste volume, however, was down 1.2% in the quarter, while recycling processing and commodity sales contributed 0.7% to total internal growth.

Year-to-date, Republic Services returned $834.3 million to shareholders in the form of $329.5 million of share buybacks and $504.8 million in dividends paid. Looking to 2024, Republic Services now expects revenue near the low end of its 2024 guidance range ($16.075-$16.125 billion) and adjusted EBITDA at the high end of the range ($4.9-$4.925 billion). We like Republic Services moaty business model and its pricing strength, and the company remains a core holding in the newsletter portfolios.

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