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Stericycle Q3 Earnings Beat on Inorganic Growth

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Leading waste management company Stericycle Inc. (SRCL - Free Report) reported year-over-year improvements in both revenues and net income in third quarter 2013, primarily aided by accretive acquisitions. The company reported net income of $80.5 million or 92 cents per share in third quarter 2013 compared with $65.5 million or 75 cents per share in the year-earlier quarter.

Excluding one-time non-recurring items, adjusted earnings for the reported quarter were 96 cents per share vis-à-vis 84 cents in the year-ago quarter. The adjusted earnings beat the Zacks Consensus Estimate by a couple of cents.

Revenues & Margins

Revenues for the reported quarter were up 11.3% year over year to $534.6 million, but missed the Zacks Consensus Estimate of $543 million. The increase in revenues was primarily attributable to inorganic growth, which contributed approximately $34.1 million of the $54.1 million year-over-year rise. Excluding unfavorable foreign exchange translation impact of about $5.3 million, revenues increased 12.4% year over year to $539.9 million.

Domestic revenues (GAAP) increased 8.6% year over year to $378.1 million in the reported quarter. International revenues (GAAP) were up 18.3% year over year to $156.5 million.

Gross profit for the reported quarter aggregated $241.4 million versus $215.6 million in the year-ago quarter. Gross margin in third quarter 2013 was 45.2% compared with 44.9% in the prior-year period.

Financial Position

As of Sep, 30, 2013, cash and cash equivalents totaled $63.6 million compared with $31.3 million at year-end 2012. Cash from operations for the nine months ended Sep 30, 2013, was $335.3 million versus $277.1 million in the corresponding period in the preceding year.

Long-term debt remained flat at $1.3 billion compared with year-end 2012. Debt to EBITDA ratio was 2.1x at quarter end. Stericycle had $622 million available under its revolving credit facility at the end of the quarter.

During the reported quarter, the company repurchased 421,060 shares for $48.4 million and currently has an authorization to purchase an additional 2.8 million shares.


In the reported quarter, Strericycle closed 17 acquisitions, including 10 in international and 7 in domestic locations. The international acquisitions comprised three in Argentina, two in the U.K., two in Romania, one in Mexico, one in Canada and one in Spain. The acquisitions contributed $3.9 million in revenues during the quarter.

Stericycle expects earnings per share to be in the range of $3.72 to $3.73 for 2013. Revenues for 2013 are expected to be in the range of $2.13 billion to $2.145 billion. Capital expenditure for 2013 is expected to be in the range of $67 million to $70 million.

For 2014, Stericycle expects earnings per share to be in the range of $4.11 to $4.16 with revenues in the range of $2.32 billion to $2.35 billion. Capital expenditure is expected to be in the range of $70 million to $75 million in 2014.

Stericycle is witnessing strong growth across the globe, driven by acquisitions and expansion of its portfolio of service offerings. We remain encouraged by the company’s solid performance in the reported quarter and expect the growth momentum to continue in the coming quarters as well.

Stericycle currently has a Zacks Rank #4 (Sell). Other stocks that look promising and are worth considering now in the industry include Clean Harbors, Inc. (CLH - Free Report) and Clear Channel Outdoor Holdings Inc. (CCO - Free Report) , both carrying a Zacks Rank #2 (Buy), and Republic Services, Inc. (RSG - Free Report) that retains a Zacks Rank #1 (Strong Buy).

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