Republic Services is Thursday's IBD Stock Of The Day as the waste collector and recycler has one of the cleanest and flattest stock charts around. RSG stock, which has seen its relative strength line take off amid the S&P 500 pullback. is near a couple of buy points.
Phoenix-based Republic Services is the No. 2 waste hauler in the country behind Waste Management, but it's the No. 1 stock in the Pollution Control industry group, according to IBD Stock Checkup.
Republic Services Growth
RSG stock's fundamentals and technical factors match up well with just about anyone — not just its own group. Republic Services has a 98 IBD Composite Rating, putting it in the top 2% of all stocks.
The company has a lot going for it. Its Sunbelt base offers attractive population and economic growth, relative to the U.S. as a whole. Republic Services made $1.8 billion worth of acquisitions in 2023 and sees no shortage of deal targets going forward.
Productivity initiatives are paying off, raising its adjusted EBITDA margin 60 basis points to 29.7% in 2023. That should rise to 30% this year, the company's outlook indicates.
Revenue grew 10.8% in 2023, including 6% organic growth and 4.8% from acquisitions.
First-quarter earnings are due after the market close on April 30. Waste Management and Waste Connections both are set to report late on April 24.
Renewable Natural Gas
Republic Services also sees opportunity in "sustainability innovation." According to its latest presentation, the company is has four "polymer centers" to produce recycled plastic packaging that could add $200 million in revenue by 2028.
Further, Republic Services is partnering to convert landfill gas into renewable energy. More than 50 developments are planned, which could add $70 million in incremental revenue by 2028.
In a March 18 note, Jefferies said that the underappreciated renewable natural gas, or RNG, opportunity could lift earnings by 10% to 15% and boost margins by 100 to 200 basis points. At the time, Jefferies hiked his price target for Republic Services to 225 from 213, keeping a buy rating.
RSG
RSG dipped 0.1% in Thursday afternoon stock market action, as the S&P 500 slipped 0.2%.
Republic Services has been carving out an eight-week flat base since shares spiked intraday on Feb. 28, following its Q4 report.
Shares of Republic Services have found support lately at its 21-day exponential average.
Republic Services has an official flat-base buy point of 192.57, according to a MarketSurge analysis.
RSG flirted with an early entry point on Thursday, before reversing modestly lower. A move past today's intraday high of 189.83 would be actionable.
However, the current market conditions and upcoming earnings for Republic Services and rivals raise the risk of any buy.
RSG's relative strength line has climbed to a new 52-week high and is right near an all-time high. The advance for the RS line, the blue line in IBD charts that tracks a stock's progress vs. the S&P 500, can be a bullish sign when it happens before a stock breaks out.
However, the pullback in the S&P 500 has lowered the bar.
