Buy Signal on Republic Services (RSG-US)
Republic Services is a $29.8 bn market cap and America's # 2 in the collection, treatment, recycling and disposal of non-toxic solid waste. Revenues are split between 1/solid waste collection services (64% of sales): services provided mainly to commercial, residential, industrial customers. 2/waste transfer and disposal services (30% of sales): possession of 212 transfer stations and 189 embankments; and 3/waste recycling services (2% of sales). The group is also developing a sale of recycled products.
The company showed strong resilience in Q2-2020 (-10% yoy in both revenues and EPS, but adj. EBITDA margin increased by 170bp). The company looks well-positionned in environmental/renewable energy projects as volumes return. The company expects to generate $1.1 to $1.175 bn of adj. Free cash flows for the full year 2020.
Short term catalyst: Renewable energy projects.
This signal is consistent with the strong momentum in renewable/environmental services segment.