Date: December 11, 2012
Source: News Room
Republic Services could generate a total return of 30 percent over the next 12 months, according to a recent article in Barron's Magazine that highlights recent research from Goldman Sachs. That is based on a price target of $37 per share, which is less than 16 times projected 2014 earnings, and in line with the stock's historical average price-to-earnings ratio. The company is already seeing a recovery in waste collection volume which is expected to increase over the next year as the economy improves and housing and construction recover. Another analyst, Tony Bancroft of Gabelli & Co., says the company "has been a good steward of capital" and points to future growth with the housing recovery. Others agree. Last month Bill Gates' private investment firm Cascade boosted its investment in the company by 14 percent to 89 million shares, which represents a 25 percent stake.
At $29 per share, the stock price is more than 5 percent higher than a year ago but lagging the 13 percent gains of the S&P 500 and is 13 percent off its multi-year high it hit in May 2011. Waste volumes have been affected by some lost business, the economic downturn, especially from slumping residential and commercial construction, weak retail spending, diminished newspaper circulation, etc. The weak economy has also hurt global demand for recycled commodities the prices of which have fallen by an average of 33 percent for Republic since last year.
Late last month the company announced measures to cut expenses and shore up effeciencies that are expected to yield annual savings of $23 million. Meanwhile, volumes could rise 1.7 percent next year and another 2.8 percent in 2014,according to figures from Goldman Sachs. Over the longer term, the company has one of the strongest portfolios of disposal assets, including a possibly undervalued portfolio of landfills which should only become increasingly valuable as demand for disposal increases and while it becomes increasingly difficult to site and build new ones.
See also: "Goldman Sachs Analyst Sees Recovery in Waste Business," (www.wasteinfo.com/news/wbj20121205A.htm), December 5, 2012.
See also: "Bill Gates Buys More Republic Services; Has 25% Stake," (www.wasteinfo.com/news/wbj20121129F.htm), November 13, 2012.
See also: "Bill Gates Accumulates More Republic Services Shares," (www.wasteinfo.com/news/wbj20121003E.htm), September 29, 2012.
See also: "Republic Services Profit Down on Weaker Volume and Recycling Prices," (www.wasteinfo.com/news/wbj20121107A.htm), November 1, 2012.
See also: "Republic Services to Restructure Operations and Eliminate Jobs," (www.wasteinfo.com/news/wbj20121031C.htm), October 31, 2012.
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