) third-quarter 2012 adjusted earnings were 47 cents per share,
missing the Zacks Consensus Estimate of 49 cents and also behind
the year-ago adjusted earnings of 53 cents.
REPUBLIC SVCS (RSG): Free Stock Analysis
WASTE MGMT-NEW (WM): Free Stock Analysis
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Adjusted earnings excluded 5 cents per share, pertaining to
negotiation and withdrawal costs in the reported quarter.
Adjusted earnings in the year-ago quarter excluded 1 cent per
share pertaining to extinguishment of debt. Including these
items, earnings were 42 cents per share in the quarter, compared
with the year-ago earnings of 52 cents.
Total revenues decreased 3.3% to $2.047 billion, lagging behind
the Zacks Consensus Estimate of $2.115 billion for the quarter.
The decrease in the top line was attributable to reduction of
0.4% in fuel surcharge, 2.1% in volumes and 2% in recycling
commodities pricing, partially offset by inflationary effect of
core prices of 1% and acquisitions (net of divestitures) of 0.2%.
Cost of operations rose 1.6% to $1.28 billion. Selling, general
and administrative expenses declined 6.6% to $193.8 million in
Adjusted operating income dropped 15.7% to $349.4 million.
Consequently, adjusted operating margin contracted 250 basis
points to 17.1% in the reported quarter.
Total revenues from the Collection segment increased 0.5% to
$1.58 billion. Residential collection revenues rose 0.7% to $542
million. Commercial collection revenues increased 1% to $632.4
million. Meanwhile Industrial collection revenues fell 0.4% to
$395.9 million in the quarter and Other collection revenues
decreased 1.2% to $8.4 million in the quarter. The Transfer
segment revenues dipped 10% year over year to $101.3 million.
Cash and cash equivalents were $74 million as of September 30,
2012, compared with $66.3 million as of December 31, 2011.
Long-term debt excluding current maturities amounted to $7.06
billion as of September 30, 2012, compared with $6.89 billion as
of December 31, 2011.
Cash from operating activities was $1056.7 million for nine
months ended September 30, 2012, compared with $1,286.8 million
for nine months ended September 30, 2011. Adjusted free cash flow
was $479.7 million for nine months ended September 30, 2012,
versus $701.3 million for first nine months ended September 30,
Board of Directors approved share repurchase up to $750 million
through December 31, 2013. This was in addition to the previous
repurchase program of $400 million authorized in November 2012.
During the quarter Republic Services repurchased 1.3 million
shares for $35.7 million at weighted average cost of $28.32.
Adjusted earnings are projected to lie in between $1.85-$1.87 per
share, down from the previous guidance of $1.91-$1.93 per share
in 2012. The company expects adjusted free cash flow of $775
million, down from the earlier guidance of $775 million. For
2013, adjusted earnings are expected to be in the range of
$1.90-$1.92 per share.
Republic Services intends to invest roughly $30 million in
restructuring of field as well as corporate operations to reduce
selling, general and administrative expenses approximately by $23
million annually. The company will incur half of the expenses in
the fourth quarter of 2012, contracting margins in the quarter.
Moreover, margins remain constrained as Republic Services has
more exposure to Collection services and less to Disposal
services. Typically, the Disposal services generates the highest
margins and the Collection services generates the lowest margin.
Republic Services faces competition from
Waste Management, Inc.
). The company retains a short-term Zacks #4 Rank (Sell). We have
a long-term Underperform recommendation on the stock.