) first-quarter 2012 adjusted earnings were 38 cents per share,
missing the Zacks Consensus Estimate of 42 cents and also behind
the year-ago adjusted earnings of 42 cents. On a reported basis,
earnings were 38 cents per share in the quarter compared with the
year-ago earnings of 41 cents.
Total revenues increased 0.9% to $1.98 billion, lagging behind
the Zacks Consensus Estimate of $1.99 billion for the quarter. An
increase of 0.6% in core prices, 0.5% in fuel recovery fee, 0.2% in
volumes and acquisitions (net of divestiture) of 0.4%, collectively
offset the 0.8% decline in recycling commodities pricing.
Cost of operations increased 3.8% year over year to $1.20
billion. Selling, general and administrative expenses rose 9.1% to
$222.5 million in the quarter.
Adjusted operating income declined 16.4% to $323.3 million.
Consequently, operating margin dropped 290 basis-points to 16.3% in
the reported quarter.
Total revenues from the Collection segment increased 1.5% to
$1.53 billion. Residential collections rose 0.9% to $530.9 million.
Commercial collection increased 0.5% to $621.1 million and
Industrial collection soared 3.9% to $367.7 million.
Other collections remained flat at $7.9 million in the quarter.
Transfer segment revenue dipped 2.8% year over year to $220.6
Cash and cash equivalents were $73.5 million as of March 31,
2012, compared with $66.3 million as of December 31, 2011.
Long-term debt excluding current maturities amounted to $6.87
billion as of March 31, 2012, compared with $6.89 billion as of
December 31, 2011.
Cash from operating activities was $334.2 million during
first-quarter 2012 compared with $433.7 million during
first-quarter 2011. Adjusted free cash flow was $175.3 million
during the quarter versus $272.8 million in the year-ago
During the first-quarter 2012, Republic Services repurchased 1
million shares for $31 million. It has $620 million under its
authorization to repurchase till 2013.
Outlook for 2012
The company expects 1% increase in pricing and flat volumes to
lift revenues by 1%. The company had earlier factored in 1%-1.5%
increase in pricing and 0.5% from volumes in its revenue
Adjusted earnings are projected to lie in between $1.86-$1.90
per share, down from the previous range of $1.98-$2.02. Adjusted
free cash flow is expected to be in the lower end of the range of
Republic Services has invested considerably to enhance its
capability in the recycling centers. It invested nearly $46 million
in 2011 to develop and upgrade these centers. Furthermore, Republic
Services 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.
Increasing fuel costs, however, remains a problem for the
company. The average price per gallon of diesel escalated 9% to
$3.97 in the quarter. If prices remain at this level for fuel,
Republic Services will face margin headwind for the balance of the
Moreover, it faces tough competition from companies like
) and privately held Waste Industries USA, Inc. Waste Management
reported adjusted earnings of 38 cents per share, a penny below the
year-ago quarter and two cents short of Zacks consensus Estimate.
It expects adjusted earnings in the range of $2.22-$2.30 per share
in 2012. The Zacks Consensus estimate is pegged at $2.24 per share
which lies within the guidance range of the company.
Currently, we have a long-term Neutral recommendation on
Republic Services. The stock retains a short-term Zacks #4 Rank
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