Waste management company Republic Services (NYSE: RSG) missed Wall Street’s revenue expectations in Q2 CY2025 as sales rose 4.6% year on year to $4.24 billion. The company’s full-year revenue guidance of $16.71 billion at the midpoint came in 0.9% below analysts’ estimates. Its non-GAAP profit of $1.77 per share was 0.7% above analysts’ consensus estimates.

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Company Overview

Processing several million tons of recyclables annually, Republic (NYSE: RSG) provides waste management services for residences, companies, and municipalities.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, Republic Services’s sales grew at a solid 9.8% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Republic Services’s recent performance shows its demand has slowed as its annualized revenue growth of 6.5% over the last two years was below its five-year trend.

We can dig further into the company’s revenue dynamics by analyzing its number of units sold. Over the last two years, Republic Services’s units sold were flat. Because this number is lower than its revenue growth, we can see the company benefited from price increases.

This quarter, Republic Services’s revenue grew by 4.6% year on year to $4.24 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 5.9% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and indicates its newer products and services will not catalyze better top-line performance yet. At least the company is tracking well in other measures of financial health.

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Operating Margin

Republic Services has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 18.8%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Republic Services’s operating margin rose by 2.3 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q2, Republic Services generated an operating margin profit margin of 20.3%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Republic Services’s EPS grew at a spectacular 14.7% compounded annual growth rate over the last five years, higher than its 9.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Republic Services’s earnings can give us a better understanding of its performance. As we mentioned earlier, Republic Services’s operating margin was flat this quarter but expanded by 2.3 percentage points over the last five years. On top of that, its share count shrank by 1.9%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Republic Services, its two-year annual EPS growth of 14.7% is similar to its five-year trend, implying strong and stable earnings power.

In Q2, Republic Services reported EPS at $1.77, up from $1.61 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Republic Services’s full-year EPS of $6.74 to grow 7%.

Key Takeaways from Republic Services’s Q2 Results

It was good to see Republic Services narrowly top analysts’ sales volume expectations this quarter. We were also happy its EBITDA narrowly outperformed Wall Street’s estimates. On the other hand, its revenue slightly missed and its full-year revenue guidance fell slightly short of Wall Street’s estimates. Overall, this was a mixed quarter. The stock remained flat at $246.00 immediately after reporting.

Is Republic Services an attractive investment opportunity at the current price? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.