Republic Services Earnings: Margin Expansion Continues; Progress Made on Sustainability Investments

Wide-moat-rated Republic Services reported strong first-quarter results, featuring elevated pricing gains (core price increased 7%) and robust adjusted EBITDA margin expansion (up 120 basis points to 30.2%). Republic Services’ strong profit margins have been supported by its pricing power, a function of its wide economic moat, and management’s willingness to embrace technology to reduce operating costs. For example, the company’s RISE digital operating platform has improved route density, which in our view, is a source of cost advantage for the firm. Republic Services has also invested in an asset management system that should lower maintenance costs. In fact, management expects $20 million of costs savings by 2026. Finally, the company is using camera technology to ensure proper container volumes and reduce recycling contamination. Management thinks this initiative will result in $60 million of additional revenue for the firm.