Republic Services (RSG) benefits from acquisitions and debt problems

Republic Services, Inc.it is (RSG) stocks have had an impressive run on the stock exchanges over the past year. The stock has appreciated 30.1% over the past year against the 13% drop in the industry it belongs to. The Zacks S&P 500 composite rose 8.3% during the said period.

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The company recently reported fourth-quarter 2021 adjusted earnings per share of $1.02, which topped the consensus mark of 1% and rose 2% year-over-year. Quarterly revenue of $2.95 billion beat the consensus estimate of 2.7% and was up 15% year over year.

How are the Republic Services doing?

Republic Services’ revenue growth was supported by the favorable impact of acquisition revenues and organic growth. In the fourth quarter of 2021, the company recorded a favorable impact of 9.9% from internal growth and 4.9% from acquisitions.

Company remains focused on increasing operational efficiency by switching to compressed natural gas (“CNG”) collection vehicles and converting rear-loading trucks to automated sideloaders, which will reduce costs and improve profitability . The company is focused on improving its operations by streamlining cost structure, improving revenue quality and pursuing growth through profitable investment opportunities. In 2021, nearly 13% of RSG’s replacement vehicle purchases were CNG vehicles. Meanwhile, the company is very optimistic about using CNG vehicles, which will help it compete in keeping the environment clean. Despite higher expenses, CNG lowers the company’s overall fleet operating costs by reducing fuel expenses. As of December 31, 2021, Republic Services operated 40 CNG refueling stations.

Republic Services has consistently rewarded its shareholders through dividend payments and share buybacks. In 2021, 2020, and 2019, the company repurchased shares worth $252.2 million, $98.8 million, and $399.4 million, respectively. It paid $552.6 million, $522.5 million, and $491.2 million in dividends in 2021, 2020, and 2019, respectively. Such initiatives demonstrate the company’s commitment to creating value for its shareholders and underscore its confidence in its business. These initiatives not only inspire investor confidence, but also have a positive impact on earnings per share.

Republic Services’ cash and cash equivalents balance of $29 million at the end of the fourth quarter of 2021 was well below the long-term debt level of $9.55 billion, underscoring that the company does not does not have enough liquidity to meet this debt burden.

Zacks Ranking and Stocks to Consider

The Republic Services currently wears a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some stocks ranked higher overall Business services sector that investors can consider are Cross Country Health Care CCRN, Accenture ACN and Clean ports CLH. While Cross Country Healthcare sports a #1 Zacks rank, Accenture and Clean Harbors currently carry a #2 Zacks rank (buy).

Cross Country Healthcare has a four-quarter earnings surprise of 41.5% on average.

Shares of Cross Country Healthcare have jumped 68% in the past year. The company has long-term earnings growth of 6.5%.

Accenture forecasts a profit growth rate of 19.8% for the current year. The company has an earnings surprise for the last four quarters of 5.3% on average.

Accenture shares have jumped 26% in the past year. The company is posting long-term earnings growth of 10%.

Clean Harbors forecasts a 17% profit growth rate for the current year. The company has a four-quarter earnings surprise of 43.2% on average.

Shares of Clean Harbors have jumped 11.9% over the past year.

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