Republic Services Begins Renovation - Analyst Blog


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Republic Services ( RSG ) will initiate modernization of its recycling facilities at the St. Louis area by spending $19 million. The renovation activities would be carried on both at North County and South County of St. Louis.  

The renovation activity follows Republic Services' decision to enhance its capabilities in recycling centers, for which the company started investing significantly since last year. It invested nearly $46 million in 2011 to develop and upgrade these centers.

The company intends to invest an additional $60 million in 2012. These measures are expected to increase the recycling volume by nearly 12% over the next 18 months.

The Annual Green City Index issued by Siemens ( SI ) in 2011 revealed that the facility at the St. Louis region recycled only 3% of its waste as compared with 27-city index average of 26%. Republic Services expects that the renovation activities at St. Louis centers will increase the volume of waste being recycled.  

The company intends to introduce a new state-of-the-art technology which is expected to increase its recycling capacity  three-fold. This technology is also new to the Missouri area. Once the reconstruction process is completed, the company expects to employ 20 additional employees.

Republic Services arranges and sorts out the recyclables before sending them to different producers who utilize them for manufacturing new products, particularly consumer goods like toilet paper. Thus, this initiative helps in reducing the prices of consumer goods.

Moreover, if recycling happens then less waste will be deposited in the landfill spaces and this will lead to conservation of landfill spaces. The process of frequent and regular recycling will ultimately lead to conservation of more landfill spaces as this will diminish the volume of waste material deposited in the spaces. Recycling activities have socio economic impact and,  should be encouraged for a sustainable future.

Recycling activities in the St. Louis area started way back in 2008 when local people began using single-stream recycling bins. The recycling rate in St. Louis County increased 900%, cutting down nearly 49% of wastes from going to landfills.

The single-stream recycling service makes recycling easy for Republic Services. The company collects wastes including steel, aluminum, plastic, glass containers, cardboard, paper and other wastes from one bin used by people and recycles them.

The company's first-quarter 2012 adjusted earnings were 38 cents per share, missing the Zacks Consensus Estimate of 42 cents and falling behind the year-ago adjusted earnings of 42 cents. Total revenue increased only 0.9% year ove year to $1.98 billion, lagging behind the Zacks Consensus Estimate of $1.99 billion.

Increasing fuel costs remains a concern for the company. Margins affected the results as fuel expenses increased 60 basis-points year over year as diesel price inflated 9% during the quarter. If fuel prices remain at this level, Republic Services may face margin headwinds for the balance of the year.

Republic Services faces competition from companies like Waste Management ( WM ). Currently, the stock holds a short-term Zacks #4 Rank (Sell). We have a long-term neutral recommendation on Republic Services.

REPUBLIC SVCS (RSG): Free Stock Analysis Report
SIEMENS AG-ADR (SI): Free Stock Analysis Report
WASTE MGMT-NEW (WM): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
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