Republic Services Earnings: Net Income Climbs

Falling revenue did not prevent S&P 500 (NYSE:SPY) component Republic Services Inc. (NYSE:RSG) from reporting a profit boost in the second quarter. Republic Services offers non-hazardous solid waste collection, transfer, recycling and disposal services in the United States.

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Republic Services Inc. Earnings Cheat Sheet

Results: Net income for Republic Services Inc. rose to $149.5 million (41 cents per share) vs. $46.2 million (12 cents per share) in the same quarter a year earlier. This is a more than threefold rise from the year-earlier quarter.

Revenue: Fell 1.2% to $2.06 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Republic Services Inc. fell short of the mean analyst estimate of 49 cents per share. Analysts were expecting revenue of $2.09 billion.

Quoting Management: Commenting on these results, Donald W. Slager, President and Chief Executive Officer, said, “We are on track to exceed the earnings guidance that we provided in April due to the settlement of Allied’s 2004 – 2008 tax years.” Mr. Slager also stated, “The business is operating within our expectations. We achieved 30.3% EBITDA margins in the quarter, continued to see a stronger pace of acquisition activity and completed our two refinancing activities. As a result of these refinancings, we do not have a significant debt maturity until 2016. We also returned $223 million of free cash flow to our owners through share repurchases and dividends in the second quarter.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell 0.9 percentage point to 39.8% from the year-earlier quarter. Over that time, margins have contracted on average 0.8 percentage point per quarter on a year-over-year basis.

A year-over-year revenue decrease last quarter snaps a streak of four consecutive quarters of revenue increases. The best quarter in that span was the third quarter of the last fiscal year, which saw revenue rise 2.6%.

The company has now fallen short of estimates in the last two quarters. In the first quarter, it missed expectations by 4 cents with net income of 38 cents versus a mean estimate of net income of 42 cents per share.

Looking Forward: Over the past ninety days, the average estimate for the third quarter has fallen from 55 cents per share to 52 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. For the fiscal year, the average estimate has moved down from $2.01 a share to $1.88 over the last ninety days.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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