Republic Services RSG has had an impressive run over the past year. Its shares have rallied 24.4%, outperforming the 6.6% rise of the Waste Removal Services industry and the 9.3% growth of the S&P 500 composite.

The company’s earnings for 2025 and 2026 are expected to improve 6.2% and 9.5%, respectively, year over year. RSG has a long-term (three to five years) expected earnings growth rate of 9.2%.

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Factors That Augur Well for RSG

Republic Services' opening of North America's first Polymer Center and Blue Polymers plastics recycling complex in Indianapolis is a major step in advancing plastic recycling and sustainability. The complex will process more than 175 million pounds of recycled plastics annually, transforming them into food-grade packaging and other products, extending the lifecycle of plastics. The project also creates 125 skilled jobs and receives support from local and state governments. With plans for additional facilities nationwide, this initiative represents a significant move toward circular plastic recycling and environmental responsibility.

Republic Services has been recognized as one of the World’s Most Ethical Companies for the seventh consecutive year, highlighting its strong commitment to ethics, compliance and governance. This recognition reflects the dedication of its 42,000 employees to uphold ethical practices. In addition, Republic has earned other notable honors, including spots on Barron’s 100 Most Sustainable Companies list and Fortune’s World’s Most Admired Companies list, reinforcing its leadership in sustainability and corporate responsibility.

The company has shown solid revenue growth, with a 5.6% increase, driven by 4.3% organic growth and 1.3% from acquisitions, followed by even stronger 7.1% growth, which includes 4.5% organic growth and 2.6% from acquisitions. This highlights a healthy balance between expanding existing operations and strategically acquiring new businesses. Moreover, the company anticipates investing approximately $1 billion in acquisitions in 2025, which will support its growth strategy.

Moreover, RSG’s completion of two renewable natural gas projects in the quarter and six for the year highlights strong growth in sustainable energy. Additionally, the increase in recycled commodity prices by $47 per ton to $164 suggests improved market conditions, boosting revenues from recycling operations.

RSG’s commitment to its shareholders is commendable. The company returned $1.18 billion to shareholders, including $490 million in share repurchases and $687 million in dividends. In comparison, cash dividends paid were $638 million in 2023, and $592.9 million and $552.6 million in 2022 and 2021, respectively. The recent increase in the quarterly dividend to $0.580 per share represents an 8% increase over the prior year, marking the 21st consecutive year of dividend growth.

Over the last five years, dividends have grown at a compounded annual growth rate of 6.4%. Additionally, the $3.0 billion share repurchase authorization, effective from Jan. 1, 2024 through Dec. 31, 2026, reflects the company’s strong financial position and ongoing commitment to enhancing shareholder value.

RSG: Key Risks to Watch

Republic Services is facing increasing challenges related to the rising cost of operations. In 2022, the cost was $8.2 million, which rose to $8.9 million in 2023, reflecting a noticeable upward trend. In 2024, costs rose 4.6% year over year, signaling ongoing pressures on the company’s operational expenses. This increase could be attributed to factors such as inflation, higher labor costs or rising material expenses, which are impacting RSG’s bottom line.

Moreover, the company ended 2024 with a current ratio (a measure of liquidity) of 0.58. A current ratio greater than 1 is generally considered desirable, as it indicates that the company has sufficient assets to meet its short-term obligations.

RSG's Zacks Rank

Republic Services currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Some better-ranked stocks from the broader Zacks Business Services sector are Maximus MMS and AppLovin APP.

Maximus carries a Zacks Rank of 2 (Buy) at present.

MMS has an encouraging earnings surprise history, having outpaced the Zacks Consensus estimate in three of the trailing four quarters and missed once. The average beat was 13.3%.

AppLovin currently sports a Zacks Rank #1.

APP has an encouraging earnings surprise history, having outpaced the Zacks Consensus Estimate in each of the trailing four quarters. The average beat was 23.5%.

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This article originally published on Zacks Investment Research (zacks.com).

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