Republic Services (NYSE:RSG) Reports Sales Below Analyst Estimates In Q1 Earnings

Waste management company Republic Services (NYSE:RSG) fell short of the market’s revenue expectations in Q1 CY2025 as sales rose 3.8% year on year to $4.01 billion. Its non-GAAP profit of $1.58 per share was 3.1% above analysts’ consensus estimates.

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"We are off to a solid start to the year, and our business continues to perform well even with increased volatility in the broader economy," said Jon Vander Ark, president and CEO.

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

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Republic Services’s 9.3% annualized revenue growth over the last five years was solid. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Republic Services’s recent performance shows its demand has slowed as its annualized revenue growth of 7% over the last two years was below its five-year trend.

We can dig further into the company’s revenue dynamics by analyzing its number of 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 3.8% year on year to $4.01 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 5.6% over the next 12 months, similar to its two-year rate. This projection is underwhelming and suggests its products and services will see some demand headwinds. 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 18.6%. 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 2.8 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q1, Republic Services generated an operating profit margin of 20.1%, up 1.1 percentage points year on year. Since its gross margin expanded more than its operating margin, we can infer that leverage on its cost of sales was the primary driver behind the recently higher efficiency.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Republic Services’s EPS grew at a spectacular 14.7% 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.

We can take a deeper look into Republic Services’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Republic Services’s operating margin expanded by 2.8 percentage points over the last five years. On top of that, its share count shrank by 2.2%. 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 more recent period because it can provide insight into an emerging theme or development for 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 Q1, Republic Services reported EPS at $1.58, up from $1.45 in the same quarter last year. This print beat analysts’ estimates by 3.1%. Over the next 12 months, Wall Street expects Republic Services’s full-year EPS of $6.59 to grow 6.5%.

Key Takeaways from Republic Services’s Q1 Results

We enjoyed seeing Republic Services beat analysts’ sales volume, EPS, and EBITDA expectations this quarter. On the other hand, its revenue slightly missed, indicating it faced some pricing headwinds. Overall, this quarter had some key positives, but the company didn't share any forward-looking guidance. Shares traded down 1.8% to $236 immediately following the results.

Is Republic Services an attractive investment opportunity at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.