Trash taker Republic Services (click ticker for report: RSG) reported refreshing second-quarter results Thursday after its poor first-quarter performance a few short months ago. The firm also increased its quarterly dividend by roughly 7% to $0.235 per share, about in line with what we had been expecting. We think the trash taker is making appropriate strides to get back on track, and we still view the shares as undervalued.
Excluding a number of non-recurring items, Republic posted earnings per share of $0.59 versus the $0.49 mark in the same period a year ago. However, the firm’s adjusted EBITDA fell modestly from last year’s quarter, as slower revenue and margin pressure (down 80 basis points) hurt performance. The decrease in revenue of 1.2% was mainly attributable to lower volumes, and the increase in core price of 0.6% was a bit lower than we would have liked.
Still, the company offered a decent earnings outlook, with diluted earnings per share expected to be in the range of $1.91 to $1.93 for the year. We were also pleased to learn that Republic has completed its refinancing activities and doesn’t have a significant debt maturity until 2016. We take this refinancing news, in conjunction with the recent dividend hike, to mean that investors should expect high-single-digit dividend growth for years to come (now that certain cash obligations have been pushed into the future). We continue to hold Republic in our actively-managed portfolios.