Republic Services Lags by 1 Cent - Analyst Blog

Republic Services, Inc. (RSG) reported third-quarter 2010 net income from continuing operations of 45 cents, lagging the Zacks Consensus Estimate of 46 cents by a penny. Results, however, were ahead of 39 cents per share reported in the prior year quarter. Net income from continuing operations were $172.8 million, up 16% from $149.3 million in third-quarter 2009.

Including loss on extinguishment of debt of $9.2 million or 2 cents per share, costs to achieve synergies of $4.5 million or 1 cent, restructuring charges of $1.6 million or 1 cent per share and loss on disposition of assets and impairments of $23.3 million or 6 cents per share, Republic Services reported net income of $34.2 million or 35 cents per share. Results compare favorably with $120.5 million or 32 cents per share in third-quarter 2009.

Third quarter 2009 non-recurring chargers totaled $28.8 million or 7 cents per share.

Revenue in the quarter under review was $2.06 billion, a trifle decline from $2.07 billion in the prior year quarter. Reported revenue also lagged the Zacks Consensus estimate of $2.12 billion.

The core price improvement of 1.5%, fuel surcharges increase of 0.5% and commodity pricing increase 0.6% were more than offset by decreases in core volume of 2.5% and 0.7% related to divestitures, resulting in the overall decline.

Revenues dropped in all of the company's line of businesses, barring Residential. The total Collection business' revenue went down 1% to $1.6 billion. Residential collection revenue increased 0.07% to $548.4 million. Commercial Collection dipped 0.2% to $624.6 and Industrial Collection suffered the highest decline of 2% to $387.4 million. Revenue at its Transfer and disposal business went down 3% in the quarter.

Cost of operations increased 1.4% year over year to $1.2 billion.

The company reported year-over-year operating income decline of 5% to total $367.6 million in the quarter.

Financial Update

Republic Services ended the third quarter with cash and cash equivalent balance of $120.5 million, up 12% from $107.3 million at the end of third quarter 2009.

Long term debt totaled $2.8 billion, plummeting 58% from $6.8 billion at third quarter 2009 end.

Cash from operations in the quarter under review was $368.9 million, increasing 14% from $324.8 in the year ago period.

Capital expenditure inched down by 0.07% to $186 million from $187.4 million in the year ago period.

Free cash flow surged 30% year over year to $188 million in the quarter.

Dividend and Share Repurchase

The board of directors of Republic Services approved a quarterly dividend of 20cents per share. The dividend will be paid on January 18, 2011to shareholders of record on January 3, 2011.  

The board also approved a share buyback program where the company is authorized to buy back up to $400 millionof its common stock.

Full-Year 2010 Guidance

Republic Services reiterated its expectation of earnings of $1.69 - $1.71 per share.

The company guided free cash flow to $800 million, up from $750 million guided previously. The increase in guidance reflect the favorable impact of bonus depreciation

We expect the company's solid cash position, lower debt levels and share buyback program to position it to deliver better results going forward.

We maintain a Neutral recommendation on Republic Services in the long term. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term

 
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