Premier waste management firm Republic Services, Inc. RSG remains well poised to continue its growth momentum in 2015 after it started the year on a positive note with a healthy earnings beat in the first quarter. 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. Republic Services also has strong underlying fundamentals and is likely to achieve consistent earnings growth and create shareholder value in the forthcoming quarters as well.
GAAP net income in the first quarter of 2015 was $172.4 million or 49 cents per share versus $132.5 million or 37 cents per share in the year-ago quarter. The year-over-year increase in earnings was primarily attributable to higher revenues. The earnings for the reported quarter comfortably exceeded the Zacks Consensus Estimate by 5 cents.
First-quarter 2015 revenues improved 4.4% year over year to $2,169.4 million. The year-over-year increase was driven by a 2.1% rise in average yield, a 1.9% increase in volume and accretive acquisitions (net of divestitures) of 2.1%, partially offset by lower fuel recovery fees of 0.7% and lesser recycling commodity revenues of 1.0%. The average yield was the highest in the last four years and represented a significant improvement for the company. Revenues for first-quarter 2015 beat the Zacks Consensus Estimate of $2,133 million.
Adjusted EBITDA for the reported quarter was $625.9 million (28.9% of revenues) versus $547.8 million (27.7%) in the year-ago quarter. The improvement was led by changes in net fuel and commodity and reduction in risk insurance expense due to favorable claims development and continued improvement in safety related performance.
Moving forward, Republic Services is expected to benefit from the acquisition of Tervita, LLC – an environmental waste solutions subsidiary of Tervita Corporation. With the help of Tervita, Republic Services is expected to improve on its environmental protection front while achieving growth in its major activities of waste handling, recovery and disposal. Such quality acquisitions, primarily of recycling assets, are likely to act as a catalyst for healthy long-term growth within its top 25 markets. The company is also focusing on enhancing its operations by streamlining the cost structure, improving revenue quality and seeking growth through profitable investment opportunities.
Although Republic Services did not clearly shed any light on its full year guidance issued last quarter, management remained confident to achieve its set goals for the year. The company is likely to give an update on the guidance with the second-quarter results. We remain impressed with the quarterly results of the company that competes with the likes of Stericycle, Inc. SRCL, Waste Management, Inc. WM and Waste Connections Inc. WCN.
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