Republic Services (RSG): Is the Recent Stock Surge Justified?

---

Republic Services (NYSE: RSG), a prominent player in the waste management industry, has seen its stock price garner significant attention recently.

With a market capitalization of approximately $63 billion, the company has demonstrated financial strength, boasting a perfect Piotroski Score of 9.

This analysis explores the factors driving the stock’s recent performance and whether the surge is justified considering its financial health, growth forecasts, and analyst expectations.

Factors Driving the Stock Surge:

• Analyst Upgrades: RBC Capital Markets upgraded Republic Services’ stock to “Outperform,” citing a promising outlook for 2025 and an appealing valuation after a recent pullback. Other firms like Deutsche Bank and BMO Capital also upgraded the stock.

• EPS Growth Anticipation: RBC anticipates approximately 9% earnings per share (EPS) growth for 2025, building on the company’s current revenue growth of 7.88%. The company itself provided EPS guidance of $6.820-$6.900 for FY 2025, compared to the consensus EPS estimate of $6.790.

• Mergers and Acquisitions: Potential growth stemming from prospective mergers and acquisitions is also contributing to the positive outlook.

• Strong Financial Performance: Republic Services reported strong fourth-quarter and full-year 2024 results, exceeding adjusted EBITDA and adjusted earnings per share.

Is the Surge Justified?

• Valuation: RBC’s decision to upgrade Republic Services is rooted in the company’s appealing valuation in light of the stock’s recent decline. However, it’s important to consider that the stock is trading near its 52-week high.

• Growth Prospects: The anticipated 9% EPS growth for 2025 and revenue guidance of $16.9 billion-$17.0 billion support a positive outlook. The average price target from analysts is $225.38.

• Financial Stability: Republic Services has maintained dividend payments for 23 consecutive years, demonstrating consistent financial stability.

• Market Position: As the second-largest provider of non-hazardous solid waste collection in the United States, Republic Services holds a strong position in a growing market.

Potential Concerns:

• Revenue Guidance: The company issued revenue guidance of $16.9 billion-$17.0 billion, compared to the consensus revenue estimate of $17.0 billion. This suggests that revenue growth might be slightly lower than expected.

• Stock Price History: The all-time high closing price was $221.57 on February 6, 2025. The 52-week high stock price is $222.65, which is 0.7% above the current share price. This indicates limited immediate upside potential based on historical data.

The recent stock surge of Republic Services appears to be supported by positive analyst outlooks, strong financial performance, and promising growth prospects.

While potential concerns exist regarding revenue guidance, the company’s financial stability and market position suggest a solid foundation for future growth.

Investors should carefully weigh these factors and consider their own risk tolerance before making investment decisions.

Also Read