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Will Republic Services (RSG) Disappoint in Q2 Earnings?

Zacks Equity Research
Updated

Republic Services, Inc. RSG is scheduled to report second-quarter 2018 earnings on Jul 26, after market close.

The top line is expected to benefit from higher internal growth, acquisitions and impressive segmental performance. Increased revenues and tax benefits are expected to boost the bottom line.

We observe that the stock has gained 5.6% over the past year, underperforming the 5.4% rally of the industry it belongs to.

 

 

Top Line to Improve Year Over Year

The Zacks Consensus Estimate for revenues is pegged at $2.53 billion, on par with the year-ago quarter’s tally. The top line is expected to benefit from higher internal growth, acquisitions and strong segmental performance.

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The Zacks Consensus Estimate for Collection segment revenues is pegged at $1.9 billion, indicating year-over-year growth of 3.6%. In first-quarter 2018, segment revenues increased 1.1% year over year to $1.8 billion.

The consensus estimate for Transfer and Disposal segment revenues is pegged at $134 million, reflecting year-over-year rise of 3.1%. In first-quarter 2018, segment revenues improved 8.1% to $120 million.

The consensus estimate for Landfill segment revenues is pegged at $322 million, indicating year-over-year growth of 2.5%. In the last reported quarter, segment revenues improved 13% to $307 million.

Energy Services segment revenues are also expected to improve in the soon-to-be-reported quarter. Revenues are likely to be driven by an increase in drilling activity in the Permian Basin. In first-quarter 2018, segment revenues surged 77.7% year over year to $47.8 million.

In the last reported quarter, revenues inched up 1.5% year over year to $2.43 billion. This includes a positive impact of 3.8% due to internal growth and 1.8% from acquisitions.

 

Republic Services, Inc. Price and EPS Surprise

 

Republic Services, Inc. Price and EPS Surprise | Republic Services, Inc. Quote

Earnings Expectations

The Zacks Consensus Estimate for second-quarter earnings per share is pegged at 75 cents, indicating year-over-year growth of 23%. Lower tax rates as a result of the new tax law (Tax Cuts and Jobs Act) and revenue growth are likely to positively impact the company’s bottom line.

In first-quarter 2018, adjusted earnings improved 34.5% from the year-ago quarter to 74 cents.

What Does Our Predictive Model Say

According to our model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. However, that is not the case as highlighted below.

Earnings ESP: Republic Services has an Earnings ESP of -1.12% as the Most Accurate Estimate is at $0.74 per share, while the Zacks Consensus Estimate is pegged at $0.75.

Zacks Rank: Republic Services carries a Zacks Rank #4 (Sell), which lowers the predictive power of ESP.

In fact, we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Investors interested in the broader Business Services Sector may check out the following companies with the right combination of elements to beat estimates in the next releases:

Black Knight Financial Services, Inc. BKI has an Earnings ESP of +2.3% and a Zacks Rank #2. The company will release second-quarter 2018 results on Jul 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fidelity National Information Services, Inc. FIS has an Earnings ESP of +1.04% and a Zacks Rank #3.  The company will release second-quarter 2018 results on Jul 31.

S&P Global Inc. SPGI has an Earnings ESP of +0.55% and a Zacks Rank #3. The company will release second-quarter 2018 results on Jul 26.

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S&P Global Inc. (SPGI) : Free Stock Analysis Report
 
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