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Wednesday, TD Cowen analyst James Schumn increased the price target for Republic Services (NYSE:RSG) stock to $235 from $220, while maintaining a Hold rating on the shares. The stock, currently trading near its 52-week high of $232.52, appears overvalued according to InvestingPro analysis. Schumn’s adjustment reflects a positive outlook on the company’s potential to surpass its financial goals for 2025 due to strong execution and strategic mergers and acquisitions.
Republic Services has been performing well, with Schumn noting that the company’s straightforward business approach is attracting investor interest. The company boasts a perfect Piotroski Score of 9 and maintains strong financial health according to InvestingPro metrics, with revenue growing 7.13% over the last twelve months. Although some may find the 2025 guidance lackluster, Schumn believes the company has set a conservative baseline, which could lead to upward revisions in estimates throughout the year.
The analyst’s decision to raise the price target is based on a modest increase in the 2025-2030 EBITDA estimates, which are now 1% higher. This slight uptick is due to the company’s guidance aligning closely with TD Cowen’s previous expectations. The new price target of $235 is derived from a discounted cash flow analysis, using an unchanged weighted average cost of capital (WACC) of 7.25%.
The $235 price target represents a 16.1x enterprise value to EBITDA (EV/EBITDA) multiple based on the company’s projected earnings for 2025. However, Schumn notes that this new target suggests only about a 3% upside from the stock’s current levels, which is why the Hold rating remains in place despite the higher price target.
In other recent news, Republic Services reported its fourth-quarter 2024 earnings, exceeding expectations with an earnings per share (EPS) of $1.58, surpassing the projected $1.41. However, the company slightly missed revenue forecasts, reporting $4.05 billion against the expected $4.08 billion. Despite this, Republic Services demonstrated robust financial health with a 7% increase in revenue and a 12% growth in adjusted EBITDA for the year. Analysts have responded positively to the company’s performance and strategic initiatives. Stifel analysts raised their price target for Republic Services to $257, citing expected margin expansion and sustainability investments. Raymond (NSE:RYMD) James also increased their target to $243, highlighting the company’s growth through mergers and acquisitions. Similarly, Oppenheimer adjusted their target to $238, noting Republic Services’ strong financial performance and successful early quarter mergers. These developments reflect a positive outlook on Republic Services’ strategic direction and future growth potential.
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