Republic ServicesRSG

Republic Services reports its latest quarterly numbers today. Analysts expect the company to earn about $1.81 per share on $4.36 billion in revenue. The business has a long track record of topping expectations, having beaten analyst targets in each of its last eight quarters.

For long-term owners, the numbers that matter most are not the headline beats, but the underlying pricing power. We are watching to see if the company can keep raising prices by more than 5 percent to stay ahead of rising costs for labor and equipment. We are also looking for progress in its industrial waste segment, which is a key part of its plan to grow profits faster than total waste volume.

See the full quarter, and how our tracked metrics did

Key highlights

• Core pricing remains strong: The company increased its core prices by 5.7%, and prices for customers with contracts that can be renegotiated more often rose 6.8%. This shows Republic can still push through price increases well above its 5% target to offset higher costs.
• Profit margins expanding: The adjusted EBITDA margin, which is a measure of profit as a percentage of sales after removing certain one-time costs, rose to 32.1% from 31.6% a year ago. Management used effective cost control to keep operating expenses at 57.5% of revenue despite rising fuel and labor costs.
• Environmental solutions revenue dip: Revenue from the environmental solutions division, which handles hazardous waste and specialized services, fell 1.3% on an organic basis compared to last year. This segment now makes up 9.8% of total sales, moving further away from the company's 15% long-term goal.
• Aggressive acquisition spending: Republic invested $433 million into buying other businesses during the first quarter and has spent more than $700 million on acquisitions so far this year. These deals added 1.1% to total revenue growth as the company continues to consolidate the waste industry.
• Steady outlook ahead: The company confirmed it is on track to hit its full year targets, which include an earlier forecast for $18.6 to $19.1 billion in revenue and free cash flow between $2.1 and $2.15 billion. Staying with this range suggests management is confident that current pricing trends will offset the small 0.8% decline in trash volume seen this quarter.

Our take: A very clean quarter that proves Republic can keep growing profits even when the total amount of trash it collects dips slightly. Its ability to raise prices by 5.7% while expanding profit margins shows a resilient business model that continues to strengthen the long term case for owners.