Top Picks 2020: Republic Services (RSG)

01/20/2020 5:00 am EST

Focus: ENERGY

David Coleman

Quantitative Portfolio Strategist, Argus Research

David Coleman, an analyst with Argus Research, selected First Solar (FSLR) as his Top Pick in 2019. He believes the stock, which has risen 36%, is still well positioned in the solar industry. For 2020, he looks to a leader in waste management.

Republic Services (RSG) is a fully integrated waste management company, with operations ranging from waste collection and compacting to recycling and renewable energy generation,

Republic Services is the second-largest domestic provider of nonhazardous waste services, as measured by revenue. The company serves 14 million customers with operations in 40 states and Puerto Rico.

These included 348 collection operations, 207 transfer stations, 191 active landfills, 91 recycling centers, 7 treatment, recovery and disposal facilities, 11 saltwater disposal wells, and 75 landfill gas and renewable energy projects.

The average estimated remaining life of the company's landfills is 63 years. The company was founded in 1996 and is based in Phoenix.

We view Republic as a well-run company and expect it to benefit from both favorable economic conditions and demographic growth, with continued gains in revenue and margins.

Management issued preliminary 2020 guidance calling for adjusted EPS of $3.46-$3.51 and adjusted free cash flow of $1.150-$1.200 billion. Our five-year earnings growth rate forecast is 7%.

Donald W. Slager is the company's president and CEO. He has more than 35 years of experience in the solid waste industry. The primary risks faced by investors are the company's sensitivity to economic conditions and substantial capital requirements, the competitive nature of the industry, and the highly regulated nature of the business.

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