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Stericycle (SRCL) Beats on Q2 Earnings, Updates Guidance
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Waste management firm Stericycle, Inc. (SRCL - Free Report) reported solid second-quarter 2017 results with a healthy improvement in revenues on a year-over-year basis. GAAP loss for the quarter was $148.8 million or loss of $1.74 per share as against net income of $37.3 million or 43 cents per share in the year-ago quarter. The year-over-year decline in GAAP earnings, despite top-line growth, was primarily attributable to a class action lawsuit settlement for which the company recorded a charge of $295.0 million.
Adjusted earnings for the reported quarter were $1.15 per share compared with $1.18 in the year-earlier quarter. Although adjusted earnings decreased year over year, it beat the Zacks Consensus Estimate by 2 cents.
Stericycle, Inc. Price, Consensus and EPS Surprise
Second-quarter revenues were $917.7 million, up 26.1% year over year and exceeded the Zacks Consensus Estimate of $902 million. Organic revenues for the quarter improved 3.4% while acquisitions contributed $8.6 million to incremental revenues and divestures reduced the same by $0.8 million.
Domestic revenues in the reported quarter were $737.7 million, up 40.9% year over year while International revenues decreased 14.8% to $180.1 million. Regulated Waste and Compliance Services revenues declined to $512.3 million from $523.3 million. Secure Information Destruction Services revenues increased $21.9 million to $212.4 million, primarily due to higher recycling revenues. Communication and Related Services revenues increased to $102.9 million from $82.5 million as market-leading position and unique capabilities enabled the company to serve new brands across several industries. Manufacturing and Industrial Services revenues declined $5.1 million to $90.1 million.
Gross profit (GAAP) in the reported quarter was $381.8 million, up 1.1% year over year. Gross margin was 41.6%, down from 42.4% in the prior-year quarter.
Acquisitions
During the reported quarter, Stericycle closed six tuck-in acquisitions (including four in the domestic market and two in the international market). The deals together contributed about $0.2 million to corporate revenues in the quarter. The worldwide acquisition pool of the company remains robust with well over $100 million in annualized revenues in multiple geographies across business lines.
Financial Position
As of Jun 30, 2017, cash and cash equivalents were $44.2 million while long-term debt (net of current portion) was $2,749.8 million.
Net cash from operating activities for the first six months of the year was $237.1 million compared with $245.4 million in the year-ago period. The debt-to-EBITDA (earnings before interest, tax, depreciation and amortization) ratio was 3.46x at the quarter end. Stericycle had an unused borrowing capacity of $676 million under its revolving credit facility. Capital expenditure for the quarter was $30 million. During the quarter, the company repurchased 175,500 mandatory preferred convertible shares for $12.6 million.
Revised Guidance
For 2017, Stericycle updated its guidance in accordance with the current market scenario. Earnings are currently expected in the range of $4.55–$4.69 per share, compared with $4.55–$4.75 expected earlier. The company expects revenues to be in the range of $3.52–$3.65 billion ($3.53–$3.66 billion was projected earlier), and free cash flow in the range of $450–$470 million (unchanged). Capital expenditure is projected to be in the range of $125–$150 million (unchanged).
ABM pulled off a positive earnings surprise of 16.9% in the trailing four quarters, beating estimates thrice.
Gartner has a long-term earnings growth expectation of 17.3%. It has a positive earnings history, beating estimates thrice in the trailing four quarters with an average earnings surprise of 4.6%.
NV5 Global has a long-term earnings growth expectation of 20%. It delivered a positive earnings surprise of 1.8% in the trailing four quarters.
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Stericycle (SRCL) Beats on Q2 Earnings, Updates Guidance
Waste management firm Stericycle, Inc. (SRCL - Free Report) reported solid second-quarter 2017 results with a healthy improvement in revenues on a year-over-year basis. GAAP loss for the quarter was $148.8 million or loss of $1.74 per share as against net income of $37.3 million or 43 cents per share in the year-ago quarter. The year-over-year decline in GAAP earnings, despite top-line growth, was primarily attributable to a class action lawsuit settlement for which the company recorded a charge of $295.0 million.
Adjusted earnings for the reported quarter were $1.15 per share compared with $1.18 in the year-earlier quarter. Although adjusted earnings decreased year over year, it beat the Zacks Consensus Estimate by 2 cents.
Stericycle, Inc. Price, Consensus and EPS Surprise
Stericycle, Inc. Price, Consensus and EPS Surprise | Stericycle, Inc. Quote
Revenues & Margins
Second-quarter revenues were $917.7 million, up 26.1% year over year and exceeded the Zacks Consensus Estimate of $902 million. Organic revenues for the quarter improved 3.4% while acquisitions contributed $8.6 million to incremental revenues and divestures reduced the same by $0.8 million.
Domestic revenues in the reported quarter were $737.7 million, up 40.9% year over year while International revenues decreased 14.8% to $180.1 million. Regulated Waste and Compliance Services revenues declined to $512.3 million from $523.3 million. Secure Information Destruction Services revenues increased $21.9 million to $212.4 million, primarily due to higher recycling revenues. Communication and Related Services revenues increased to $102.9 million from $82.5 million as market-leading position and unique capabilities enabled the company to serve new brands across several industries. Manufacturing and Industrial Services revenues declined $5.1 million to $90.1 million.
Gross profit (GAAP) in the reported quarter was $381.8 million, up 1.1% year over year. Gross margin was 41.6%, down from 42.4% in the prior-year quarter.
Acquisitions
During the reported quarter, Stericycle closed six tuck-in acquisitions (including four in the domestic market and two in the international market). The deals together contributed about $0.2 million to corporate revenues in the quarter. The worldwide acquisition pool of the company remains robust with well over $100 million in annualized revenues in multiple geographies across business lines.
Financial Position
As of Jun 30, 2017, cash and cash equivalents were $44.2 million while long-term debt (net of current portion) was $2,749.8 million.
Net cash from operating activities for the first six months of the year was $237.1 million compared with $245.4 million in the year-ago period. The debt-to-EBITDA (earnings before interest, tax, depreciation and amortization) ratio was 3.46x at the quarter end. Stericycle had an unused borrowing capacity of $676 million under its revolving credit facility. Capital expenditure for the quarter was $30 million. During the quarter, the company repurchased 175,500 mandatory preferred convertible shares for $12.6 million.
Revised Guidance
For 2017, Stericycle updated its guidance in accordance with the current market scenario. Earnings are currently expected in the range of $4.55–$4.69 per share, compared with $4.55–$4.75 expected earlier. The company expects revenues to be in the range of $3.52–$3.65 billion ($3.53–$3.66 billion was projected earlier), and free cash flow in the range of $450–$470 million (unchanged). Capital expenditure is projected to be in the range of $125–$150 million (unchanged).
Zacks Rank & Key Picks
Stericycle currently has a Zacks Rank #2 (Buy). Other stocks in the broader industry worth considering include ABM Industries Incorporated (ABM - Free Report) , Gartner, Inc. (IT - Free Report) and NV5 Global, Inc. (NVEE - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ABM pulled off a positive earnings surprise of 16.9% in the trailing four quarters, beating estimates thrice.
Gartner has a long-term earnings growth expectation of 17.3%. It has a positive earnings history, beating estimates thrice in the trailing four quarters with an average earnings surprise of 4.6%.
NV5 Global has a long-term earnings growth expectation of 20%. It delivered a positive earnings surprise of 1.8% in the trailing four quarters.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>