Garbage was the ultimate commodity business until a young McKinsey consultant saw how Republic Services could transform itself into a profit machine by pricing all sorts of trash at a premium. Now he’s CEO of the outperforming junk giant.
the Sheep mountains just north of Las Vegas, the Apex landfill receives 8,000 tons of trash per day, delivered by 280 trucks that roll off the interstate before laboring up a winding dirt road to what’s called the working face—an active zone of three acres where supersized bulldozers with spiked metal wheels crush and compact the trash. The heap is already 500 feet deep at spots, but there’s enough room left to keep burying Sin City’s garbage for centuries.
Republic, which is based in Phoenix, operates 198 landfills, 71 recycling centers and collection routes in 41 states. After a pandemic down year in 2020, volumes recovered in 2021, helping it notch a 17% increase in net income, to $1.3 billion, on $11.3 billion in sales. Its stock, trading around $131, is down only 10% from its 2021 high, compared to an 18% slide in the S&P 500.
“I’m a cynic about hiring consultants from McKinsey,” says Michael Hoffman, managing director at Baltimore’s Stifel Investments, who has followed the garbage business since 2008. “But Jon brought something that they wouldn’t have figured out. Industrial waste has never priced assets as scarce. Never maximized routes.”
and carting equipment to trash haulers around the world. If you want a piece of Heil, you’ll have to buy shares of, the Illinois-based mini-conglomerate that bought into the garbage truck business in 1993. It’s also a big player in pumps, winches, hoists, commercial refrigerators and equipment for automotive repair. Revenue this year is expected to grow 8.3% to $8.6 billion, with earnings up 11%.