Image Source: Republic Services
By Brian Nelson, CFA
Republic Services (RSG) reported solid second-quarter 2023 results July 31, and it raised its full-year 2023 guidance across the board. During the period ending June 30, 2023, total revenue advanced 9.1% with more than half coming via organic means, while GAAP earnings per share of $1.41 exceeded the consensus forecast by $0.10. Republic Services continues to experience strong pricing power, helping to drive double-digit EBITDA expansion in the quarter. Adjusted free cash flow came in at ~$1.265 billion through the first six months of the year. Earlier in July, Republic Services increased its dividend ~8% to a quarterly payout of $0.535 per share (was $0.495). Shares yield ~1.4% at the time of this writing.
For the full-year 2023, Republic Services expects revenue to come in the range of $14.775-$14.85 billion (was $14.65-$14.8 billion), with “growth from average yield on total revenue of approximately 6.0%.” We like the company’s expectations for continued pricing strength. Adjusted diluted earnings per share is targeted in the range of $5.22-$5.38 (was $5.15-$5.23), while adjusted free cash flow for 2023 is expected in the vicinity of $1.9-$1.925 billion (was $1.86-$1.9 billion). Adjusted free cash flow continues to march higher the past few years advancing from ~$1.74 billion in 2022, ~$1.5 billion in 2021, and ~$1.24 billion in 2020. Though Republic Services sports a net debt position, we love its free cash flow generation.
Republic Services benefits significantly from its long-term disposal assets as these operations grow more attractive as time passes thanks to the increasing regulatory nature of the waste business, as well as citizen groups opposed to greenfield sites growing in number and strength. These disposal assets, including its Apex landfill in Nevada, which is the busiest facility of its kind in the US, represent the material barriers to entry that give the company a large portion of its moaty characteristics. Republic operates an essential business and roughly 80% of its revenue has an annuity-type profile. We continue to like Republic Services across several of our newsletter portfolios. Shares are up more than 17% year-to-date.
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Tickerized for RSG, WM, WCN, CWST, SRCL, EVX, USMV, CLH, CVA, DAR, VEOEY, SZEVY, ENGIY
Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, BITO, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, and RSP. 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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