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Reasons to Retain Stericycle (SRCL) Stock in Your Portfolio

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Stericycle, Inc. (SRCL - Free Report) is currently benefiting from strong customer relationships and its multi-year business transformation initiative. company has an expected long-term earnings per share (three to five years) growth rate of 8%.

Factors That Auger Well

Being a leading player in the waste management industry, Stericycle should benefit from ongoing trends such as increasing environmental concerns, rapid industrialization, increase in population and active government measures to reduce illegal dumping.

The services that Stericycle provides cannot usually be delayed and are required on a routine and scheduled basis. This helps the company to achieve a steady flow of revenues. Stericycle has strong customer relationships, boasting of long-term contracts ranging from three to five years. This enables the company to maintain a revenue retention rate of around 90%.

Stericycle is progressing well with its comprehensive multi-year Business Transformation initiative aimed at improving long-term operational and financial performance. The five key objectives of the program include improving quality of revenues; driving operational efficiency through work measurement, asset optimization, technology and strategic sourcing; portfolio rationalization through divestitures; debt reduction and leverage improvement; and ERP implementation.

Hurdles to Counter

In the last-reported quarter, Stericycle’s bottom line was negatively impacted by higher supply chain, labor and other inflationary costs, as well as higher ongoing IT operating expenditures, higher selling costs and bad debt expenses. The impact of divestitures remained a major hindrance to revenue growth.

Zacks Rank and Stocks to Consider

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

Some better-ranked stocks in the broader Zacks Business Services sector are Avis Budget Group, Inc. (CAR - Free Report) , Cross Country Healthcare (CCRN - Free Report) and Automatic Data Processing, Inc. (ADP - Free Report) .

Avis Budget sports a Zacks Rank #1 at present. CAR has a long-term earnings growth expectation of 19.4%. 

Avis Budget delivered a trailing four-quarter earnings surprise of 102%, on average. 

Cross Country Healthcare sports a Zacks Rank of 1. CCRN has a long-term earnings growth expectation of 6.9%.

Cross Country Healthcare delivered a trailing four-quarter earnings surprise of 29.2%, on average. 

Automatic Data Processingcarries a Zacks Rank of 2, currently. ADP has a long-term earnings growth expectation of 12%.

Automatic Data Processingdelivered a trailing four-quarter earnings surprise of 6.2%, on average.