We reaffirm our Underperform recommendation on Republic Services, Inc. (RSG) with a target price of $26. The company reported adjusted earnings of $0.59 per share in the quarter, beating the Zacks Consensus Estimate of $0.49. Total revenues decreased 1.2% to $2.06 billion, missing the Zacks Consensus Estimate of $2.11 billion.
Margins are expected to remain constrained as The company has less exposure to higher margin generating Disposal services. Moreover, soft volumes will be headwinds due to the uncertain economic conditions in the U.S.
We are reiterating our Underperform recommendation on Republic Services. Our price target of $26 is based on 13.6x our fiscal 2012 earnings estimate.
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