Why Is Republic Services (RSG) Down 2.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Republic Services (RSG). Shares have lost about 2.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Republic Services due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Repuclic Services Beats Q1 Earnings Estimates

Republic Services reported mixed first-quarter 2024 results, with earnings surpassing the Zacks Consensus Estimate but revenues missing the same.

RSG’s earnings per share of $1.5 beat the Zacks Consensus Estimate by 5.8% and increased 16.9% from the year-ago quarter. Revenues of $3.9 billion missed the consensus mark by a slight margin but increased 7.8% year over year.

Segmental Revenues

Revenues from Collection totaled $2.7 billion, up 8.3% from the year-ago quarter, beating our estimate of $2.6 billion. Revenues (net) in the Transfer and Landfill segments were $182.8 million and $404.6 million, rising 5.2% and 3% year over year, respectively. The Transfer and Landfill segments’ revenues missed our estimate of $197 million and $432.5 million, respectively. The Other segment’s revenues of $188.4 million increased 27.2% from the year-ago quarter and surpassed our estimate of $165 million. Environmental solutions’ revenues (net) of $423.3 million increased 3.7% year over year and beat our estimate of $418.8 million.

Operating Results

Adjusted EBITDA for the quarter was $1.2 billion, which marked a 12% increase from the year-ago quarter, meeting our estimate. The adjusted EBITDA margin of 30.2% increased 120 basis points from the prior-year quarter, beating our estimate of 28.1%.

Balance Sheet & Cash Flow

Republic Services exited first-quarter 2024 with cash and cash equivalents of $91.6 million compared with $140 million at the end of the preceding quarter. The long-term debt (net of current maturities) was $11.4 billion compared with $11.9 billion at the end of fourth-quarter 2023. RSG generated $811.5 million in cash from operating activities in the reported quarter. The adjusted free cash flow was $535 million. Capital expenditure in first-quarter 2024 was $514.5 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

Currently, Republic Services has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Republic Services has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Republic Services is part of the Zacks Waste Removal Services industry. Over the past month, Stericycle (SRCL), a stock from the same industry, has gained 11.7%. The company reported its results for the quarter ended March 2024 more than a month ago.

Stericycle reported revenues of $664.9 million in the last reported quarter, representing a year-over-year change of -2.8%. EPS of $0.57 for the same period compares with $0.49 a year ago.

Stericycle is expected to post earnings of $0.57 per share for the current quarter, representing a year-over-year change of +32.6%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.1%.

Stericycle has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

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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.

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