On Wednesday, Oppenheimer adjusted its outlook on Republic Services (NYSE:RSG), a waste management company, by increasing the price target to $220 from the previous target of $219, while maintaining an Outperform rating on the stock.
Republic Services reported third-quarter adjusted EBITDA and EPS that surpassed the consensus, despite a softer top line. The company conveyed optimism about reaching the higher end of its full-year 2024 EBITDA guidance and the lower end of its sales forecast. A preliminary outlook for fiscal year 2025 was also presented, aligning closely with current consensus expectations.
Year-over-year, the company achieved a margin expansion of 210 basis points, outperforming consensus by 130 basis points. This was attributed to broad-based operational expense leverage and the identification of multiple internal levers for fiscal year 2025.
Despite facing volume headwinds impacting top-line growth, particularly in the cyclical large container and residential segments, these challenges are expected to set favorable comparative benchmarks for organic growth in fiscal year 2025.
In light of these developments, Oppenheimer has introduced estimates for fiscal year 2026. The firm also raised its adjusted EBITDA, EPS, and free cash flow (FCF) estimates for fiscal years 2024 and 2025. The slight increase in the price target reflects the firm's updated expectations based on the company's performance and prospects.
In other recent news, Republic Services, Inc. reported its third-quarter earnings, which exceeded analyst estimates, though the company's revenue fell short of expectations. The firm posted adjusted earnings per share of $1.81 for the third quarter, surpassing the analyst consensus of $1.61 by $0.20. However, revenue came in at $4.08 billion, missing the $4.12 billion estimate.
Total revenue saw a year-over-year increase of 6.5%, including 4.2% organic growth and 2.3% from acquisitions. On the downside, volume decreased revenue by 1.2%, while core price on total revenue increased 6.2%.
In terms of profitability, the company expanded its adjusted EBITDA margin by 210 basis points to 32.0% compared to the same quarter last year. Adjusted EBITDA rose to $1.30 billion from $1.15 billion a year ago.
These are among the recent developments for Republic Services. For the full year 2024, the company expects revenue to be near the low end of its previous guidance range, yet it anticipates achieving the high end of its adjusted EBITDA guidance range.
InvestingPro Insights
Republic Services' strong performance and positive outlook are further supported by real-time data from InvestingPro. The company's market capitalization stands at an impressive $64.17 billion, reflecting its significant presence in the waste management industry.
InvestingPro Tips highlight Republic Services' financial stability and growth potential. The company has raised its dividend for 21 consecutive years, demonstrating a commitment to shareholder returns. This aligns with the company's strong performance mentioned in the article, particularly its margin expansion and optimistic outlook for EBITDA.
Additionally, Republic Services' revenue growth of 7.85% over the last twelve months and 8.64% in the most recent quarter underscores its ability to generate top-line growth, even in the face of volume headwinds mentioned in the article. The company's EBITDA growth of 12.77% further supports Oppenheimer's decision to raise its adjusted EBITDA estimates.
It's worth noting that Republic Services is trading near its 52-week high, with a price that is 97.9% of its 52-week high. This aligns with Oppenheimer's increased price target and maintained Outperform rating.
For investors seeking more comprehensive analysis, InvestingPro offers 14 additional tips for Republic Services, providing a deeper understanding of the company's financial health and market position.
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