Republic Services, Inc. (NYSE:RSG) collects and disposes of waste in the U.S. and Canada. It is one of the 10 best stocks to buy according to billionaire Mario Gabelli’s fund. Richard Chilton’s Chilton Investment Company, which has about 6% of its portfolio in the stock, is the second-largest hedge fund holder in our data, behind Cliff Asness’ AQR Capital Management. Republic Services is one of the 10 best stocks to buy according to billionaire Richard Chilton.
Republic Services Q2 revenue rose 4.6%, and price increases drove most of it. Management raised its full-year revenue, EBITDA and cash flow guidance. The board raised the quarterly dividend by 7.2%, the 23rd straight annual increase. Recycling is the soft spot, since recycled commodities sold for less than a year ago. See how Republic Services is winning on price while volumes slip.
Bull Case
Republic Services keeps earnings growing in weak markets because it owns the landfills and collection routes its customers depend on, so it can raise prices ahead of its costs. That steady cash flow pays for acquisitions, share buybacks and a dividend that has grown for 23 years. Management sees early signs of recovery in industrial activity and commercial construction, which would bring volume back. The London Company Income Equity Strategy bought the stock as a new holding in the second quarter after the shares fell about 8% over the prior year. See why The London Company bought it.
Bear Case
The growth story depends on price increases, and price increases have limits. Volume fell 1.6% in the second quarter, and construction is still weak, especially in housing. Customers feel the strain from inflation, and higher fuel costs add to bills that Republic Services passes along through fuel fees. Recycled commodity prices are lower than a year ago. Higher interest rates hurt a stock like this too. The dividend yield is about 1.2%, and the 10-year Treasury yields about 5.3%.
Valuation
Republic Services trades at a forward P/E of 29.7, which is 59% above the sector median of 18.7 and 2.5% below its own five-year average of 30.5. The S&P 500’s forward P/E is 19.0, according to FactSet. Analyst consensus has earnings per share growing about 3.6% in 2026 and 10.75% in 2027. The market’s earnings grow about 10% a year over the long run, so Republic Services grows far slower than the market this year and at about the same pace in 2027, at a multiple about 56% higher. The PEG ratio, which compares the P/E to growth, is 3.53 against 1.43 for the sector. If earnings grow 10.75% a year, the P/E falls to about 24 in two years and about 22 in three, while the market stays near 19.
Buyers at this price are betting that price increases keep beating costs and that earnings growth speeds up in 2027. If growth stays near 4%, a multiple near 30 is hard to defend. See the bull thesis on Republic Services, Inc..
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This article is originally published at Insider Monkey.
