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Why Is Stericycle (SRCL) Up 1.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Stericycle (SRCL - Free Report) . Shares have added about 1.3% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Stericycle due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Stericycle Misses Q4 Earnings Estimates

Stericyclereported mixed fourth-quarter 2020 results, with earnings missing the Zacks Consensus Estimate and revenues surpassing the same. In line with discouraging bottom-line results, shares of the company have plunged marginally since the earnings release.

Adjusted earnings (excluding 6 cents from non-recurring items) per share of 59 cents missed the Zacks Consensus Estimate by 7.8% and declined 18.1% year over year. Earnings fell due to an unfavorable impact of 5 cents from divestitures and foreign-exchange rates, 6 cents from lower income from operations and 8 cents from higher adjusted tax rate. These were partially offset by a benefit of 6 cents from lower interest expenses.

However, revenues of $655.9 million surpassed the consensus mark by 1.5% and declined 18% year over year. The downfall was due to divestitures that hurt revenues by $133.7 million and lower Secure Information Destruction that impacted revenues by $30.9 million. Revenues dropped 1.8% on an organic basis due to the COVID-19 pandemic.

Revenues by Service

Regulated Waste and Compliance Services revenues fell 19.5% year over year on a reported basis but increased 3.2% on an organic basis to $439.8 million. The segment contributed 67.1% to total revenues. Secure Information Destruction revenues declined 14% year over year on a reported basis and 14.2% organically to $187.4 million. The segment contributed 28.6% to total revenues.

Communication and Related Services revenues fell 20.1% year over year on a reported basis and 1.7% organically to $28.7 million. The segment contributed 4.4% to total revenues.

Revenues by Geography

Revenues from North America were $526.2 million, down 20.7% year over year on a reported basis and 3% organically. The region contributed 80.2% to total revenues. International revenues of $129.7 million fell 4.8% year over year on a reported basis and increased 4.3% organically. The region contributed 19.7% to total revenues.

Profitability Performance

Adjusted gross profit in the reported quarter amounted to $269.5 million compared with $285.2 million in the year-ago quarter. Adjusted gross profit margin was 41%, up from 35.7% in the prior-year quarter. Adjusted operating income was $108.6 million compared with $122.6 million in the year-ago quarter. Adjusted operating income margin was 16.6%, up from 15.3% in the prior-year quarter. Adjusted EBITDA was $133.6 million compared with $152.8 million in the year-ago quarter. Adjusted EBITDA margin was 20.4%, up from 19.1% in the prior-year quarter.

Balance Sheet & Cash Flow

Stericycle exited the quarter with cash and cash equivalents of $53.3 million compared with $59.5 million at the end of the prior quarter. Long-term debt was $1.69 billion compared with $1.88 billion at the end of the prior quarter. The company generated $165 million of net cash from operating activities and capex was $24.8 million in the quarter. Free cash flow of $140.2 million was generated in the quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Stericycle has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Stericycle has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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