Waste management company Republic Services (NYSE:RSG) fell short of the market’s revenue expectations in Q4 CY2024, but sales rose 5.6% year on year to $4.05 billion. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $16.9 billion at the midpoint. Its non-GAAP profit of $1.58 per share was 13.6% above analysts’ consensus estimates.
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Republic Services (RSG) Q4 CY2024 Highlights:
- Revenue: $4.05 billion vs analyst estimates of $4.07 billion (5.6% year-on-year growth, 0.7% miss)
- Adjusted EPS: $1.58 vs analyst estimates of $1.39 (13.6% beat)
- Adjusted EBITDA: $1.25 billion vs analyst estimates of $1.21 billion (31% margin, 3.8% beat)
- Management’s revenue guidance for the upcoming financial year 2025 is $16.9 billion at the midpoint, in line with analyst expectations and implying 5.4% growth (vs 7.2% in FY2024)
- Adjusted EPS guidance for the upcoming financial year 2025 is $6.86 at the midpoint, beating analyst estimates by 1%
- EBITDA guidance for the upcoming financial year 2025 is $5.3 billion at the midpoint, in line with analyst expectations
- Operating Margin: 19.8%, up from 18.3% in the same quarter last year
- Free Cash Flow Margin: 13%, up from 4.1% in the same quarter last year
- Sales Volumes rose 1.2% year on year, in line with the same quarter last year
- Market Capitalization: $69.99 billion
Company Overview
Processing several million tons of recyclables annually, Republic (NYSE:RSG) provides waste management services for residences, companies, and municipalities.
Waste Management
Waste management companies can possess licenses permitting them to handle hazardous materials. Furthermore, many services are performed through contracts and statutorily mandated, non-discretionary, or recurring, leading to more predictable revenue streams. However, regulation can be a headwind, rendering existing services obsolete or forcing companies to invest precious capital to comply with new, more environmentally-friendly rules. Lastly, waste management companies are at the whim of economic cycles. Interest rates, for example, can greatly impact industrial production or commercial projects that create waste and byproducts.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Luckily, Republic Services’s sales grew at a solid 9.3% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Republic Services’s annualized revenue growth of 8.9% over the last two years aligns with its five-year trend, suggesting its demand was stable. 
We can dig further into the company’s revenue dynamics by analyzing its units sold. Over the last two years, Republic Services’s units sold were flat. Because this number is lower than its revenue growth, we can see the company benefited from price increases. 
This quarter, Republic Services’s revenue grew by 5.6% year on year to $4.05 billion, missing Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 5.6% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.
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Operating Margin
Republic Services has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 18.4%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Analyzing the trend in its profitability, Republic Services’s operating margin rose by 3.1 percentage points over the last five years, as its sales growth gave it operating leverage.
In Q4, Republic Services generated an operating profit margin of 19.8%, up 1.6 percentage points year on year. The increase was encouraging, and since its gross margin actually decreased, we can assume it was recently more efficient because its operating expenses like marketing, R&D, and administrative overhead grew slower than its revenue.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Republic Services’s EPS grew at a remarkable 14.3% compounded annual growth rate over the last five years, higher than its 9.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Diving into Republic Services’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Republic Services’s operating margin expanded by 3.1 percentage points over the last five years. On top of that, its share count shrank by 2.1%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. 
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For Republic Services, its two-year annual EPS growth of 14.4% is similar to its five-year trend, implying strong and stable earnings power.
In Q4, Republic Services reported EPS at $1.58, up from $1.41 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Republic Services’s full-year EPS of $6.45 to grow 5.3%.
Key Takeaways from Republic Services’s Q4 Results
We enjoyed seeing Republic Services exceed analysts’ EPS expectations this quarter. We were also glad its sales volume outperformed Wall Street’s estimates. On the other hand, its revenue slightly missed. Overall, this quarter had some key positives. The stock traded up 1.6% to $228.01 immediately after reporting.
Indeed, Republic Services had a rock-solid quarterly earnings result, but is this stock a good investment here? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
