On Wednesday, Oppenheimer reaffirmed its positive stance on Republic Services (NYSE:RSG), raising the waste management company's price target to $195 from $182. The firm maintains an Outperform rating on the stock. This adjustment follows Republic Services' impressive fourth quarter of 2023 performance, which surpassed expectations on both revenue and earnings fronts.
The company reported substantial year-over-year margin growth in the fourth quarter, with a 260 basis point increase. This margin expansion outperformed the consensus estimate by 140 basis points. Contributing factors to this growth included a sequential rise in average yield by 50 basis points and stronger event volumes. Additionally, the moderation in cost inflation bolstered the company's financials.
Looking forward to the fiscal year 2024, Republic Services has provided guidance that projects adjusted EBITDA and free cash flow midpoints 3% higher than analyst predictions. The company's forecast includes a 30 basis point margin expansion, with an underlying 60 basis points improvement expected. This optimistic outlook is supported by several potential drivers, such as increased event volumes and productivity gains.
Republic Services concluded the previous year with significant mergers and acquisitions activity, adding an annualized revenue of $340 million in the fourth quarter alone. Management has indicated a robust pipeline for the upcoming fiscal year, along with planned investments in renewable natural gas (RNG) and circular plastics initiatives.
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