Waste management company Republic Services (NYSE:RSG) reported good Q4 2016 earnings after market close on February 16, beating the company's own guidance, but meeting analysts' estimates. The results, though, easily trumped the year-ago quarter. The stock's price rose slightly in after-hours trading in response.

By the numbers

Metric Q4 2016 Q4 2015 Year-Over-Year Change
Revenue $2.4 billion $2.3 billion 4.3%
Net income $189.5 million $179.3 million 5.7%
Earnings per share $0.55 $0.49 12.2%

Data source: Republic Services press release. Chart by author.

Garbage truck with recycling bins.

Republic Services has been working diligently to improve its customer experience. Image source: Getty Images.

The highlights

Essentially, Republic Services delivered a good, but not outstanding quarter. Revenues and earnings grew over the prior-year quarter, as expected.

Basically, there are two ways for a waste management company to improve its bottom line. It can haul and process a higher volume of trash and recycling, or it can charge more for the services it provides, or both. In the fourth quarter, Republic's revenue growth from average yield was 2.2%, and volumes increased 0.5%. This means Republic was successfully able to grow price and volume simultaneously during the quarter.

Customer churn remained low at approximately 7%, indicating that despite the price increases, Republic has been able to hang onto its customers. The company has aggressively touted its superior customer experience, and it has invested heavily in mobile and e-commerce capability as well as customer resource centers that are slated to be fully functional by the end of 2017.

What management had to say

President and CEO Don Slager had this to say about the company's results:

We finished the year strong and delivered fourth-quarter and full-year results that exceeded the upper-end of our guidance. Our positive momentum continued throughout 2016 which resulted in full-year margin expansion, high-single digit earnings and free cash flow growth, and improved return on invested capital. Our solid results continue to reflect positive contributions from reinvesting back into the business and successfully executing our strategy of profitable growth through differentiation.

Looking ahead

The company gave relatively unchanged guidance for 2017, although its predictions are still upbeat. Republic expects EPS of $2.32 to $2.36, compared to $2.22 for 2016. Management expects to grow revenue by 4.5%-5%, with adjusted free cash flow of $875 million to $900 million, roughly in line with 2016's $885 million.

Republic plans to spend approximately $100 million on tuck-in acquisitions. The Company also expects to return approximately $900 million total cash to shareholders, through $450 million of dividends and $450 million in share repurchases. 

Slager commented:

Our financial guidance is consistent with the preliminary outlook we provided last October demonstrating the visibility we have into our business and stability of our earnings and cash flows. During 2017, we will continue to advance our strategic initiatives, profitably grow our business, create value for our stakeholders and increase cash returns to our owners.

Republic Services has been a workmanlike company lately: reliably hitting its goals and meeting expectations quarter-in and quarter-out. It may not make for exciting news, but it tends to make for happy investors.