Garbage is far from the most glamorous subject to talk about, but if it does have one redeeming quality, it's the fact that it's dependable. That dependability leads to pretty predictable results for refuse companies, which is exactly what Republic Services (RSG 1.99%) delivered during the third quarter. The company's report, which was released after markets closed on Thursday, was right in line with its recently raised guidance.
Republic Services results: The raw numbers
|
Q3 2015 Actuals |
Q3 2014 Actuals |
Growth (YOY) | |
|---|---|---|---|
|
Revenue |
$2.34 billion |
$2.27 billion |
3.4% |
|
Adjusted Net Income |
$184.7 million |
$186.0 million |
-0.7% |
|
Adjusted EPS |
$0.53 |
$0.52 |
1.9% |
Data source: Republic Services,
What happened with Republic Services this quarter?
Republic Services continues to make steady progress:
- Revenue growth was driven by both a higher yield from higher pricing, which increased 2.5%, and higher volumes, which increased 0.6%.
- Margins were 28.1%, which were flat with the year ago-quarter. The company benefited from lower fuel costs, but that benefit was offset by weakness in its recycling business, as well as from the impact from recent acquisitions.
- This resulted in adjusted earnings per share that were right in line with the company's guidance.
- During the quarter, the company returned $191 million to investors via share repurchases and dividends. Republic Services also approved an additional $900 million for its share buyback program.
What management had to say
In commenting on the quarter, CEO Donald Slager pointed out that:
Our results continue to demonstrate the progress we have made with our strategy of profitable growth through differentiation, while capturing the benefits of a steady improvement in solid waste trends... Our initiatives are delivering strong results through a heightened focus on the customer experience and improving service delivery, while reducing costs through operational programs and efficiencies.
Primary evidence of this profitable growth can be found in the company's adjusted free cash flow, which topped $600 million through the first nine months of 2015. That's roughly $170 million, or 39.4%, better than what it produced through the first nine months of last year. In fact, it's because of this cash-flow growth that the company is boosting its share-repurchase authorization.
Republic Services is also doing a better job than rival Waste Management (WM 1.41%) at growing free cash flow. Through the first three quarters of this year, Waste Management produced $1.22 billion in free cash flow, which is less than the $1.35 billion in free cash flow the company produced in the prior period. Further, even after adjusting for the higher acquisition proceeds that Waste Management received last year, its cash flow has still grown only 7.6% year over year.
Looking forward
With 2015 drawing to a close, Republic Services is already looking ahead to 2016, issuing its preliminary outlook. According to Slager:
Our preliminary outlook represents mid- to high- single digit growth excluding the anticipated increase in our effective tax rate. This level of growth is strong given the impact low CPI will have on our indexed-based pricing.
Putting numbers behind that outlook, the company expects earnings per share to be in a range of $2.13 to $2.17. Meanwhile, adjusted free cash flow is expected to be in a range of $790 million to $810 million. While not a glamorous outlook, it still represents dependable growth.
