Republic Services Earnings: Impressive Margin Expansion Continues; Acquisition Pipeline Remains Strong

Wide-moat-rated Republic Services’ latest quarterly performance continued to showcase the firm’s pricing power and management’s strong execution. Indeed, second-quarter revenue increased almost 9% year over year primarily due to pricing gains and acquisitions, and adjusted EBITDA margin expanded 110 basis points to 31.1%. Republic’s average yield (that is, price growth) has been elevated (around 5%-6% compared with its historical average around 2.5%) as the firm has flexed its pricing power in an inflationary environment. That said, we expect sales growth from price increases will moderate as inflation eases, which could narrow Republic’s price/cost spread. Even so, the company has several initiatives that should benefit profit margins, such as the RISE digital operating platform, which should improve route density.