Tags: Republic | RSG | WM | waste

Republic Services: Steady in Uncertain Times

By    |   Tuesday, 04 Oct 2011 11:50 AM

Republic Services (RSG) is the type of company investors should consider when the market and economy are uncertain. Some recent moves by the company's board of directors should enhance the value of the stock going forward.

Republic Services is in the garbage collection business. The company has pick up, transfer, and landfill operations in 40 states and is the second-largest garbage collection company after Waste Management (WM). Although the company generates three-quarters of its revenue from the collection of non-hazardous solid waste — a pretty steady business — related business ventures give the company an environmentally friendly green tinge. For example, Republic Services is current generating renewable energy through more than 70 landfill gas-production facilities.

For the first half of 2011, Republic Services reported operating earnings of 90 cents per share, up from 84 cents in 2010. Revenue for the first half of 2011 was just $25 million higher than in 2010 at $4.05 billion. Company management provides pretty accurate forward guidance on earnings and the consensus estimate reflects that guidance. Net income for full year 2011 is forecast to be $1.88, compared to $1.71 earned in 2010.

Investors should note that recently reported GAAP earnings are significantly lower than the operating earnings discussed here. The difference is primarily due to a 32 cents per share loss on the extinguishment of debt.

Rewarding shareholders

The Republic Services board of directors recently increased the quarterly dividend by 10 percent to 22 cents per share. Using the current share price, this dividend puts the stock yield above 3 percent. The board also authorized a $750 million stock buyback.

This authorization plus the shares repurchased on the 2010 buyback will reduce the outstanding shares of RSG by more than $1 billion or close to 10 percent of market capitalization.

With revenues and net income predictable and somewhat slow growth for Republic Services, lower energy prices could be a catalyst for improved net income results. Although the company is converting much of its truck fleet to run on natural gas, diesel fuel is still a large expense item. Fuel costs for the first half of the year were 25 percent higher than in 2010.

The company next reports on Nov. 3.

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Republic Services (RSG) is the type of company investors should consider when the market and economy are uncertain. Some recent moves by the company's board of directors should enhance the value of the stock going forward. Republic Services is in the garbage collection...
Republic,RSG,WM,waste
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2011-50-04
Tuesday, 04 Oct 2011 11:50 AM
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