Republic Services, Inc (RSG) is scheduled to report its fourth-quarter 2014 results on Feb 12 after the closing bell. In the last reported quarter, quarterly earnings missed the Zacks Consensus Estimate by a penny.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Republic Services is the second largest domestic non-hazardous solid waste company in the U.S. The company is currently focusing on a series of quality acquisition opportunities, which are likely to act as catalysts for healthy long-term growth.
Republic Services recently penned a deal to acquire Tervita, LLC , an environmental waste solutions subsidiary of Tervita Corporation, for an undisclosed amount. This acquisition will strengthen Republic Services’ position in the Exploration & Production waste sector and aid in harnessing future growth opportunities. Moreover, the company is committed to its long-term strategy, which involves the maintenance of a healthy cash flow and a disciplined approach to cash utilization.
However, Republic Services’ recycling operations process certain recyclable materials for sale, including fibers, aluminum and glass, all of which are subject to significant market price fluctuations. In addition, increased competitive pressure is a cause for concern for the company.
Earnings Whispers
Our proven model does not conclusively show that Republic Services will beat earnings estimates in this quarter. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below.
Zacks ESP: The Most Accurate estimate stands at 47 cents while the Zacks Consensus Estimate is higher at 48 cents. This equates to an ESP of -2.08%.
Zacks Rank: Republic Services Zacks Rank #3, when combined with a negative ESP, makes surprise prediction difficult. Note that stocks with Zacks Rank #1, #2 and #3 have a significantly higher chance of beating earnings.
However, we caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat in the imminent future.
Arch Capital Group Ltd. (ACGL), earnings ESP of +0.95% and a Zacks Rank #1
Century Aluminum Co. (CENX), earnings ESP of +7.69% and a Zacks Rank #2.
Alnylam Pharmaceuticals, Inc. (ALNY), earnings ESP of +4.55% and a Zacks Rank #2
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