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Stericycle (SRCL) Beats Q3 Earnings, Offers 2017 Outlook
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Waste management firm Stericycle, Inc. (SRCL - Free Report) reported strong third-quarter 2016 results with healthy revenue and margin improvements on a year-over-year basis. Adjusted earnings for the reported quarter increased 7.8% year over year to $1.24 per share, primarily driven by higher revenues, and comfortably exceeded the Zacks Consensus Estimate by 6 cents.
GAAP earnings were 72 cents per share compared with 81 cents in the year-ago quarter. The decline in earnings, despite top-line growth, was primarily due to higher operating costs and selling, general and administrative expenses.
Revenues in the reported quarter were approximately $890.1 million, up 23.9% year over year. The upside was primarily attributable to accretive acquisitions, which contributed approximately $184.7 million. Despite the year-over-year increase, revenues missed the Zacks Consensus Estimate of $901 million.
Domestic revenues in the reported quarter were $664.1 million (up 26.9% year over year), of which domestic regulated waste and compliance services contributed $637.1 million and $26.9 million was attributable to recalls and returns. International revenues were $226.1 million, up 15.9% year over year.
Gross profit (GAAP) in the reported quarter was $379.3 million, up 26.6% year over year. Gross margin was 42.6% versus 41.7% in the prior-year quarter. Non-GAAP gross profit improved to $381.0 million from $300.2 million in the year-ago quarter. Non-GAAP gross profit margin was 42.8% versus 41.8% in the prior-year period.
Acquisitions
During the quarter, Stericycle closed five tuck-in acquisitions in the domestic market. Revenues from these acquisitions contributed about $0.4 million in the quarter.
The worldwide acquisition pool of the company remains robust with well over $100 million annualized revenues in multiple geographies across business lines.
Financial Position
As of Sep 30, 2016, cash and cash equivalents were $40.3 million. Net cash from operating activities for the first nine months of 2016 was $417.8 million compared with $293.3 million in the year-ago period.
Long-term debt (net of current portion) at the quarter end was $2,921.8 million. The debt-to-EBITDA ratio was 3.35x at the quarter end. Stericycle had an unused borrowing capacity of $607 million under its revolving credit facility.
Stericycle reported capital expenditure of $33.8 million. During the quarter, the company repurchased 265,000 shares of the mandatory preferred convertible in the open market for $19.2 million.
For 2016, earnings are currently expected in the range of $4.74–$4.76 per share, compared with $4.68–$4.75 expected earlier. The company expects revenues to be in the range of $3.56–$3.58 billion ($3.56–$3.60 billion projected earlier), and free cash flow in the range of $450–$470 million ($435–$450 million earlier). Capital expenditure is projected to be in the range of $130–$135 million.
Preliminary 2017 Outlook
Stericycle offered a preliminary outlook for 2017 based on current market conditions. For 2017, earnings are anticipated in the range of $4.57–$4.77 on revenues of $3.54–$3.67 billion. Free cash flow is expected between $450 million to $470 million, while capital expenditures are anticipated to be between $125 million to $150 million.
Waste Management has a long-term earnings growth expectation of 9% and is currently trading at a forward P/E of 21.9x.
Republic Services has a long-term earnings growth expectation of 8.7% and is currently trading at a forward P/E of 23.7x.
Carbonite has a long-term earnings growth expectation of 30.0% and is currently trading at a forward P/E of 110.0x.
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Stericycle (SRCL) Beats Q3 Earnings, Offers 2017 Outlook
Waste management firm Stericycle, Inc. (SRCL - Free Report) reported strong third-quarter 2016 results with healthy revenue and margin improvements on a year-over-year basis. Adjusted earnings for the reported quarter increased 7.8% year over year to $1.24 per share, primarily driven by higher revenues, and comfortably exceeded the Zacks Consensus Estimate by 6 cents.
GAAP earnings were 72 cents per share compared with 81 cents in the year-ago quarter. The decline in earnings, despite top-line growth, was primarily due to higher operating costs and selling, general and administrative expenses.
Revenues & Margins
Revenues in the reported quarter were approximately $890.1 million, up 23.9% year over year. The upside was primarily attributable to accretive acquisitions, which contributed approximately $184.7 million. Despite the year-over-year increase, revenues missed the Zacks Consensus Estimate of $901 million.
Domestic revenues in the reported quarter were $664.1 million (up 26.9% year over year), of which domestic regulated waste and compliance services contributed $637.1 million and $26.9 million was attributable to recalls and returns. International revenues were $226.1 million, up 15.9% year over year.
Gross profit (GAAP) in the reported quarter was $379.3 million, up 26.6% year over year. Gross margin was 42.6% versus 41.7% in the prior-year quarter. Non-GAAP gross profit improved to $381.0 million from $300.2 million in the year-ago quarter. Non-GAAP gross profit margin was 42.8% versus 41.8% in the prior-year period.
Acquisitions
During the quarter, Stericycle closed five tuck-in acquisitions in the domestic market. Revenues from these acquisitions contributed about $0.4 million in the quarter.
The worldwide acquisition pool of the company remains robust with well over $100 million annualized revenues in multiple geographies across business lines.
Financial Position
As of Sep 30, 2016, cash and cash equivalents were $40.3 million. Net cash from operating activities for the first nine months of 2016 was $417.8 million compared with $293.3 million in the year-ago period.
Long-term debt (net of current portion) at the quarter end was $2,921.8 million. The debt-to-EBITDA ratio was 3.35x at the quarter end. Stericycle had an unused borrowing capacity of $607 million under its revolving credit facility.
Stericycle reported capital expenditure of $33.8 million. During the quarter, the company repurchased 265,000 shares of the mandatory preferred convertible in the open market for $19.2 million.
STERICYCLE INC Price, Consensus and EPS Surprise
STERICYCLE INC Price, Consensus and EPS Surprise | STERICYCLE INC Quote
Updated Guidance
For 2016, earnings are currently expected in the range of $4.74–$4.76 per share, compared with $4.68–$4.75 expected earlier. The company expects revenues to be in the range of $3.56–$3.58 billion ($3.56–$3.60 billion projected earlier), and free cash flow in the range of $450–$470 million ($435–$450 million earlier). Capital expenditure is projected to be in the range of $130–$135 million.
Preliminary 2017 Outlook
Stericycle offered a preliminary outlook for 2017 based on current market conditions. For 2017, earnings are anticipated in the range of $4.57–$4.77 on revenues of $3.54–$3.67 billion. Free cash flow is expected between $450 million to $470 million, while capital expenditures are anticipated to be between $125 million to $150 million.
Moving Forward
Stericycle currently has a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the industry include Waste Management, Inc. (WM - Free Report) , Republic Services, Inc. (RSG - Free Report) and Carbonite, Inc. , each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Waste Management has a long-term earnings growth expectation of 9% and is currently trading at a forward P/E of 21.9x.
Republic Services has a long-term earnings growth expectation of 8.7% and is currently trading at a forward P/E of 23.7x.
Carbonite has a long-term earnings growth expectation of 30.0% and is currently trading at a forward P/E of 110.0x.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>