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Stericycle (SRCL) Stock Down 5.7% Despite Q3 Earnings Beat

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Stericycle, Inc. (SRCL - Free Report) reported impressive third-quarter 2020 results, beating the Zacks Consensus Estimate on both earnings and revenues. The better-than-expected results however failed to impress the market as there has not been any major price change since the earnings release.

Adjusted earnings per share of 68 cents beat the Zacks Consensus Estimate by 19.3% but declined 15% year over year. Earnings fell due to an unfavorable impact of 12 cents from divestitures and foreign-exchange rates, 4 cents from lower income from operations and 7 cents from higher adjusted tax rate.  These were partially offset by a benefit of 11 cents from lower interest expenses.

Revenues of $636.4 million marginally beat the consensus mark and decreased 23.6% year over year. The downfall was due to divestitures that hurt revenues by $162 million, and lower Secure Information Destruction that impacted revenues by $36.6 million. Revenues were down $4.3% on an organic basisdue to the COVID-19 pandemic.

Notably, Stericycle’s shares have gained 14.9% over the past year against 7.9% decline of the industry it belongs to.

Let’s delve deeper into the numbers

Revenues by Service

Regulated Waste and Compliance Services revenues decreased 24.7% year over year on a reported basis but increased marginally on an organic basis to $415.5 million. The segment contributed 65% of total revenues.

Secure Information Destruction revenues declined 15.9% year over year on a reported basis and 16.8% organically to $187.3 million. The segment contributed 30% to total revenues.

Communication and Related Services revenues fell 43% year over year on a reported basis and 2.9% organically to $33.6 million. The segment contributed 5% of total revenues.

Revenues by Geography

Revenues from North America were $517.1 million, down 25.3% year over year on a reported basis and 4.7% organically. The region contributed 81% of total revenues.

International revenues of $119.3 million fell 15.5% year over year on a reported basis and 2.5% organically. The region contributed 19% of total revenues.

Profitability Performance

Adjusted gross profit in the reported quarter amounted to $267.3 million compared with $299.2 million in the year-ago quarter. Adjusted gross profit margin was 42%, up from 35.9% in the prior-year quarter.

Adjusted operating income was $101 million compared with $118.8 million in the year-ago quarter. Adjusted operating income margin was 15.9%, up from 14.3% in the prior-year quarter.

Adjusted EBITDA was $126.8 million compared with $150.5 million in the year-ago quarter. Adjusted EBITDA margin was 19.9%, up from 18.1% in the prior-year quarter.

Balance Sheet & Cash Flow

Stericycle exited the quarter with cash and cash equivalents of $59.5 million compared with $42 million at the end of the prior quarter. Long-term debt was $1.88 billion compared with $1.99 billion at the end of the prior quarter.

The company generated $157.9 million of net cash from operating activities and capex was $20.1 million in the quarter. Free cash flow of $137.8 million was generated in the quarter.

Currently, Stericycle carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Business Services Companies

Equifax Inc. (EFX - Free Report) reported third-quarter 2020 adjusted earnings of $1.87 per share that beat the Zacks Consensus Estimate by 16.2% and improved 26.4% on a year-over-year basis. Revenues of $1.07 billion outpaced the consensus estimate by 5.9% and improved 22% year over year.

ManpowerGroup Inc. (MAN - Free Report)  reported third-quarter 2020 earnings of $1.12 per share, beating the consensus mark by 90.5% but declining more than 37.5% year over year. Revenues of $4.58 billion surpassed the consensus mark by 8.7% but declined 12.7% year over year.

IHS Markit Ltd. (INFO - Free Report) recorded third-quarter fiscal 2020 adjusted earnings per share of 77 cents that surpassed the consensus estimate by 11.6% and increased 15% on a year-over-year basis. Total revenues came in at $1.07 billion, marginally surpassing the consensus mark but declining 4% from the year-ago quarter.

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