By Brian Nelson, CFA
Trash taker Republic Services (RSG) recently reported third quarter results that were mixed. Revenue growth of 3.3% missed the consensus analyst estimate, while non-GAAP earnings per share exceeded the consensus mark by $0.12. Total revenue growth was driven by 1.7 percentage point organic growth and 1.6 percentage point growth from acquisitions. Adjusted earnings per share came in at $1.90 versus $1.81 per share in the prior-year period, while its adjusted EBITDA came in at $1.38 billion on a margin of 32.8%, up 80 basis points over the prior year quarter.
Management had the following to say about the results:
We delivered strong third-quarter results as we continue to execute our strategy for sustainable, profitable growth. Despite ongoing cyclical volume pressures, our ability to price ahead of cost inflation and disciplined operational execution drove an 80-basis-point expansion in adjusted EBITDA margin. These results underscore the resiliency of our business model and the value from continued investments in our differentiated capabilities.
Republic Services continues to price ahead of cost inflation. In the quarter, core price on total revenue increased 5.9%, while revenue growth from average yield on total revenue was 4.0% as volume decreased total revenue by 0.3%. Year-to-date cash flow from operating activities was $3.32 billion, while adjusted free cash flow came in at $2.19 billion. Year-to-date cash returned to shareholders was $1.13 billion, which included $584 of share buybacks and $544 million of dividends paid. Republic ended the quarter with $13.3 billion in total debt and $84 million in cash and cash equivalents. We like Republic Services’ pricing power, and the garbage hauler remains a core holding in the newsletter portfolios.
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Brian Nelson owns shares in SPY, SCHG, QQQ, QQQM, DIA, VOT, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, QQQM, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, RSP, SCHG, QQQ, QQQM, and VOO. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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