S&P 500   3,819.72
DOW   31,270.09
QQQ   309.16
S&P 500   3,819.72
DOW   31,270.09
QQQ   309.16
S&P 500   3,819.72
DOW   31,270.09
QQQ   309.16
S&P 500   3,819.72
DOW   31,270.09
QQQ   309.16
Log in

For Republic Services (NYSE:RSG) the Future Looks Electric

Tuesday, February 23, 2021 | Chris Markoch
For Republic Services (NYSE:RSG) the Future Looks Electric

On February 22, Republic Services (NYSE:RSG) reported its 2020 fourth quarter and full-year earnings. The company recorded a double beat with earnings per share (EPS) coming at $1.00 well above the 80 cents projected by analysts. Republic had a narrower beat on the top line with revenue coming in at $2.57 billion, just above the $2.55 billion that was forecast.

Over the last five years, RSG stock has been kind to both growth and value investors. The stock has nearly doubled over that time. At the same time, the company has delivered a dividend increase in each of those years. In fact, Republic has increased its dividend for 11 straight years.

But the real story for Republic Services is what’s coming in the future. Sustainability is a pillar of the company’s near- and long-term focus. Through the company’s Our Blue Planet initiative, Republic is demonstrating its commitment to the environment through among other things: decreased vehicle emissions, innovative landfill technologies, and the use of renewable energy.

In fact, 20% of the company’s fleet operates on natural gas which reduces unwanted noise and air emissions. But this just appears to be the tip of the iceberg in regard to sustainability. 

Embracing Electrification

In 2020, the electric vehicle (EV) sector exploded. Many companies went public in an opportunity to capture investor’s dollars as they sought to raise capital as the EV future begins to move into high gear. To that end, Republic Services has staked out a leadership position in developing an electric fleet.

The industry is facing specific pressures that are driving the move to electrification. First, many states, notable California have regulations that are mandating the conversion to an electric fleet. But aside from the sustainability benefits, companies such as Republic Services are recognizing the need to lower its total cost of ownership.

Electric trucks have the ability to decrease maintenance costs and reduce noise for employees and for their customers. The waste management business is an ideal application for electric trucks because they reduce concern about range anxiety. Specifically, the trucks return to the same location every day. This opens the door to overnight charging while allowing the trucks to complete their routes on a single charge.

Republic is Embracing Multiple Paths

On the company’s earnings call, management emphasized it was forming relationships with multiple providers to achieve its goal. One of the company’s big headlines in December was the breaking off of its relationship with Nikola Motors (NASDAQ:NKLA). The company had entered into a non-binding contract with Nikola for 2,500 vehicles.

However, due to longer than expected development time and unexpected costs, the two companies mutually agreed to “discontinue their collaboration.” When asked about the effect of the dissolution on the company’s books, management said it had no material effect.

And while the potential partnership with Nikola was the company’s most obvious path, Republic also has partnerships with Mack and Peterbilt. In fact, in October Republic began in-service testing of the Mack LR electric truck.

But perhaps most intriguing is the company’s minority investment strategic alliance with Romeo Power (NYSE:RMO). Romeo Power is designing a lithium ion battery solution specifically for the needs of the commercial trucking sector. The company’s battery design is focused on the three key issues that are preventing wide-scale EV battery adoption. Simply put, the company is designing a lighter battery (one with higher energy density) that will allow greater range, will be able to efficiently operate in extreme climates, and address many of the safety concerns that can arise with lithium-ion batteries.

In a press release to announce the partnership, the two companies cited plans to determine what performance metrics Republic would require to me

The two companies will work closely to determine the key performance metrics of Romeo Power’s battery packs that will suit Republic’s specific refuse use-cases. The partnership is forecast to start with Romeo retrofitting two of Republic’s diesel engine trucks by the end of 2021.

Look to Buy RSG Stock On Any Dip

Heading into the earnings report, RSG stock had been trading in a choppy pattern for the last five days. Analysts have a consensus opinion of hold for the stock with a 12-month price target of $96.75. That’s about an 8% upside from its current level.

The company’s electric future is still a few years away, and that means investors should look for opportunistic dips to get ready for its electric future.

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Republic Services (RSG)2.4$91.36-0.3%1.86%28.64Buy$98.33
Nikola (NKLA)1.2$16.54-7.5%N/AN/AHold$35.86
Romeo Power (RMO)1.8$11.51-9.9%N/AN/AHold$26.00
Compare These Stocks  Add These Stocks to My Watchlist 


10 Great Cheap Stocks to Buy Now for Under $10

As the P/E ratios of most S&P 500 companies look very expensive and the stock market continues to hit new all-time highs regularly, it's challenging for investors to find cheap stocks to buy now.

This goes for both share price since most stocks are trading higher on a per-share basis and valuation relative to earnings. Right now, the typical S&P 500 company is trading at about 25 times forward-looking earnings. Historically, S&P 500 companies have traded at about 15 times earnings in more normal markets.

While the S&P 500 as a whole is expensive, there are still a handful of undervalued stocks trading at less than $10.00 per share. Value investing opportunities for value exist if you know where to look. Putting together a list of cheap stocks to buy now requires looking into some smaller, riskier, unloved, or undiscovered parts of the market. These low-priced stocks might not look especially attractive today, but long-term investors stand to profit if they are willing to be patient and hold onto shares of these companies through multiple market cycles.

Some of these companies are great investing ideas because they're too small and too risky to attract most mutual funds and Wall Street money managers. Others have been beaten up by the market after a period of slowing earnings and profits but are now trying to turn around and bounce back.

You might find marijuana stocks, dividend-paying stocks, large-cap stocks, growth stocks, small-cap stocks, and even some bitcoin stocks in this list. While these low-priced stocks have many differences, these 10 stock picks all share a common characteristic, a super-low share price of $10.00 or less.

View the "10 Great Cheap Stocks to Buy Now for Under $10".

Enter your email address below to receive a concise daily summary of analysts' upgrades, downgrades and new coverage with MarketBeat.com's FREE daily email newsletter.