BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUY BUY RATING SINCE 12/07/2010 TARGET PRICE $85.63 BUSINESS DESCRIPTION Republic Services, Inc., together with its subsidiaries, provides non-hazardous solid waste collection, transfer, recycling, disposal, and energy services for commercial, industrial, municipal, and residential customers in the United States and Puerto Rico. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change 0.97 15.89 18.07 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues 6.33 6.04 4.20 Net Income 160.56 34.97 3.07 EPS 164.00 38.01 4.98 RETURN ON EQUITY (%) Ind Avg S&P 500 Q3 2017 10.47 16.49 13.41 Q3 2016 7.79 17.65 11.79 Q3 2015 8.05 15.69 12.91 Sector: Industrials Sub-Industry: Environmental & Facilities Services Source: S&P Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years Rating History BUY Volume in Millions 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History TARGET PRICE $85.63 90 85 80 75 70 65 60 55 50 45 40 20 10 0 P/E COMPARISON RECOMMENDATION We rate () a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, compelling growth in net income, revenue growth, reasonable valuation levels and impressive record of earnings per share growth. We feel its strengths outweigh the fact that the company shows operating cash flow. 27.64 EPS ANALYSIS¹ ($) 46.16 Ind Avg 25.35 S&P 500 HIGHLIGHTS Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year. The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Services & Supplies industry. The net income increased by 160.6% when compared to the same quarter one year prior, rising from $85.70 million to $223.30 million. Q1 0.49 Q2 0.54 Q3 0.61 2015 Q4 0.49 Q1 0.45 Q2 0.52 Q3 0.25 2016 NA = not available NM = not meaningful Q4 0.55 Q1 0.55 Q2 0.60 Q3 0.66 2017 1 Compustat fiscal year convention is used for all fundamental data items. Despite its growing revenue, the company underperformed as compared with the industry average of 8.6%. Since the same quarter one year prior, revenues slightly increased by 6.3%. Growth in the company's revenue appears to have helped boost the earnings per share. reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, REPUBLIC SERVICES INC reported lower earnings of $1.77 versus $2.13 in the prior year. This year, the market expects an improvement in earnings ($2.39 versus $1.77). PAGE 1
PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -10% 60% UNFAVORABLE 0% ABM TTEK CLH EBITDA Margin (TTM) FAVORABLE ROL ADSW SRCL CVA ECOL WCN WM 35% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $1.1 Billion and $36.4 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -10% 60% CVA UNFAVORABLE -4% ADSW Earnings Yield (TTM) WCN CLH SRCL ROL ECOL FAVORABLE WM TTEK ABM Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -2.3% and 58.2%. Companies with NA or NM values do not appear. 5% INDUSTRY ANALYSIS Commercial services and supplies is a broad industry with numerous sub-industries. It includes commercial printing, diversified commercial and professional services, office services and supplies, human resources and employment services and environmental and facilities services. The commercial printing industry in the US consists of approximately 35,000 companies generating $90 billion in annual revenue. Revenue growth is driven by ongoing technological changes that make it easier to create high quality and customized prints. Growth is also aided by ongoing adjustments in print production in response to changing consumer preferences. Lithographic printing accounts for the largest share of commercial printing revenue. The dominance of this process is largely due to its wider use and lower cost. Advertising is the largest application for commercial printing. Print advertising continues to grow despite competition from non-print advertising venues such as the internet. Human resources and employment services has been one of the fastest growing industries in the US. After many years of rapid growth followed by a deep recession, the industry see slowly dropping unemployment rates and improving economic conditions. The US staffing industry will grow over the next decade according to the Bureau of Labor Statistics (BLS). The US environmental and facilities services industry is highly competitive in most service segments, but trails in some equipment segments. The industry is comprised of more than 110,000 revenue-generating organizations, representing a combination of public and private sector participants. The majority of these organizations are in the public sector, providing potable water and waste-water treatment services to limited geographic areas. In recent years, the industry has witnessed slow revenue growth. A high degree of compliance with existing environmental regulations, fewer new regulations, and the perception of softened enforcement have reduced demand for many of the industry s products and services. Many companies are responding to these changes by focusing on internal cost controls, a step that may help short-term profitability. PEER GROUP: Commercial Services & Supplies Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) 65.24 21,805 27.64 9,860.70 803.50 SRCL STERICYCLE INC 66.95 6,074 NM 3,599.30-28.07 WM WASTE MANAGEMENT INC 83.91 36,435 27.07 14,293.00 1,381.00 CLH CLEAN HARBORS INC 53.52 3,047 764.57 2,889.69 3.83 ABM ABM INDUSTRIES INC 43.33 2,822 27.60 5,277.90 15.20 TTEK TETRA TECH INC 48.27 2,690 23.66 2,753.36 117.87 ADSW ADVANCED DISPOSAL SERVICES 22.66 2,005 NM 1,475.20-23.80 CVA COVANTA HOLDING CORP 14.90 1,952 NM 1,714.00-66.00 WCN WASTE CONNECTIONS INC 68.42 18,038 51.83 4,521.94 347.32 ECOL US ECOLOGY INC 50.40 1,101 42.00 487.52 26.28 ROL ROLLINS INC 46.46 10,127 55.31 1,644.86 183.40 The peer group comparison is based on Major Environmental & Facilities Services companies of comparable size. PAGE 2
Annual Dividend Rate COMPANY DESCRIPTION Republic Services, Inc., together with its subsidiaries, provides non-hazardous solid waste collection, transfer, recycling, disposal, and energy services for commercial, industrial, municipal, and residential customers in the United States and Puerto Rico. The company's collection services include curbside collection of waste; supply of waste containers; and renting of compactors. It is also involved in the processing and sale of old corrugated cardboard, old newspapers, aluminum, glass, and other materials; and provision of landfill services. As of December 31, 2016, the company operated through 333 collection operations, 204 transfer stations, 192 active landfills, 64 recycling centers, and 10 salt water disposal wells, as well as 7 treatment, recovery, and disposal facilities in 39 states and Puerto Rico. It also operates 71 landfill gas and renewable energy projects. The company was founded in 1996 and is headquartered in Phoenix, Arizona. 18500 North Allied Way Phoenix, AZ 85054 USA Phone: 480-627-2700 http://site.republicservices.com STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 4.5 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 80% of the stocks we rate. Total Return 3.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 60% of the companies we cover. Efficiency 3.5 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 60% of the companies we review. Price volatility 5.0 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 90% of the stocks we monitor. Solvency 3.5 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 60% of the companies we analyze. Income 4.0 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 70% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial FINANCIAL ANALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. The company has grown its sales and net income during the past quarter when compared with the same quarter a year ago, and although its growth in net income has outpaced the industry average, its revenue growth has not. has very liquidity. Currently, the Quick Ratio is 0.49 which clearly shows a lack of ability to cover short-term cash needs. The liquidity decreased from the same period a year ago, despite already having liquidity to begin with. This would indicate deteriorating cash flow. 0.56 Q4 FY17 2.39 E 2017(E) 2.57 E 2018(E) During the same period, stockholders' equity ("net worth") has remained unchanged from the same quarter last year. The key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the near future. INCOME STATEMENT Net Sales ($mil) 2,562.00 2,409.30 EBITDA ($mil) 715.10 697.20 EBIT ($mil) 429.20 419.20 Net Income ($mil) 223.30 85.70 STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. BALANCE SHEET Cash & Equiv. ($mil) 63.90 55.00 Total Assets ($mil) 20,948.60 20,661.70 Total Debt ($mil) 7,857.70 7,745.30 Equity ($mil) 7,672.00 7,639.20 PROFITABILITY Gross Profit Margin 38.33% 38.71% EBITDA Margin 27.91% 28.93% Operating Margin 16.75% 17.40% Sales Turnover 0.47 0.45 Return on Assets 3.83% 2.88% Return on Equity 10.47% 7.79% DEBT Current Ratio 0.54 0.72 Debt/Capital 0.51 0.50 Interest Expense 83.10 81.40 Interest Coverage 5.16 5.15 SHARE DATA Shares outstanding (mil) 335 341 Div / share 0.35 0.32 EPS 0.66 0.25 Book value / share 22.87 22.42 Institutional Own % NA NA Avg Daily Volume 1,218,458 824,559 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4
RATINGS HISTORY Our rating for has not changed since 4/22/2010. As of 12/7/2017, the stock was trading at a price of which is 2.9% below its 52-week high of $67.18 and 17.5% above its 52-week low of $55.54. 2 Year Chart BUY: $43.94 2016 $70 $60 $50 MOST RECENT RATINGS CHANGES Date Price Action From To 12/7/15 $43.94 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 12/7/2017) 45.41% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.81% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 23.78% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION BUY. This stock's P/E ratio indicates a significant discount compared to an average of 46.16 for the Commercial Services & Supplies industry and a premium compared to the S&P 500 average of 25.35. To use another comparison, its price-to-book ratio of 2.85 indicates a discount versus the S&P 500 average of 3.22 and a significant discount versus the industry average of 5.51. The price-to-sales ratio is similar to the S&P 500 average, but it is significantly below the industry average, indicating a discount. Upon assessment of these and other key valuation criteria, proves to trade at a discount to investment alternatives within the industry. Price/Earnings 27.64 Peers 46.16 Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations. is trading at a significant discount to its peers. Price/Projected Earnings 25.43 Peers 29.82 Average. An average price-to-projected earnings ratio can signify an industry neutral stock price and average future growth expectations. is trading at a valuation on par with its peers. Price/Book 2.85 Peers 5.51 Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a significant discount to its peers. Price/Sales 2.22 Peers 2.73 Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a discount to its industry on this measurement. DISCLAIMER: Price/CashFlow 11.70 Peers 26.79 Discount. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a significant discount to its peers. Price to Earnings/Growth 0.81 Peers 1.85 Discount. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant discount to its peers. Earnings Growth lower higher 38.01 Peers 83.42 Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher 6.04 Peers 12.58 Lower. A sales growth rate that trails the industry implies that a company is losing market share. significantly trails its peers on the basis of sales growth The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. PAGE 5