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Stericycle (SRCL) Misses on Q3 Earnings, Trims Guidance
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Waste management firm Stericycle, Inc. (SRCL - Free Report) reported lackluster third-quarter 2017 results with year-over-year decrease in earnings and revenues. GAAP earnings for the quarter were $35.4 million or 41 cents per share compared with $61.5 million or 72 cents per share in the year-ago quarter. The year-over-year decline in GAAP earnings was primarily attributable to high operating expenses.
Adjusted earnings for the reported quarter declined to $1.10 per share from $1.24 in the year-earlier quarter and missed the Zacks Consensus Estimate by 4 cents.
Stericycle, Inc. Price, Consensus and EPS Surprise
Third-quarter revenues were $882.8 million, down 0.8% year over year and missed the Zacks Consensus Estimate of $898 million. Organic revenues for the quarter declined 0.6%. Acquisitions contributed $6.8 million to quarterly revenues while divestures reduced the same by $9.9 million.
Revenues from the United States and Canada were $708.2 million, up 0.8% year over year while International revenues decreased 7% to $174.6 million. Regulated Waste and Compliance Services revenues declined to $502.4 million from $520.4 million. Secure Information Destruction Services revenues increased $17.6 million to $204.7 million, primarily due to higher recycling revenues. Communication and Related Services revenues increased to $89 million from $87.5 million as market-leading position and unique capabilities enabled the company to serve new brands across several industries. Manufacturing and Industrial Services revenues declined $8.5 million to $86.6 million due to weakness in the global markets, cost pressures in Latin America and several hurricanes.
Gross profit (GAAP) in the reported quarter was $368 million, down 2.1% year over year. Gross margin was 41.7%, down from 42.4% in the prior-year quarter.
Acquisitions
During the reported quarter, Stericycle closed five tuck-in acquisitions (including four in the domestic market and one in the international market). The deals together contributed about $0.3 million to corporate revenues in the quarter. The worldwide acquisition pool of the company remains robust with more than $100 million in annualized revenues in multiple geographies across business lines.
Financial Position
As of Sep 30, 2017, cash and cash equivalents were $52.2 million while long-term debt (net of current portion) was $2,633.7 million.
Net cash from operating activities for the first nine months of the year was $392 million compared with $417.8 million in the year-ago period. The debt-to-EBITDA (earnings before interest, tax, depreciation and amortization) ratio was 3.5 at the quarter end. Stericycle had an unused borrowing capacity of $712 million under its revolving credit facility. During the quarter, the company repurchased 145,000 mandatory preferred convertible shares for $8.7 million. At the end of the quarter, Stericycle had authorization to purchase additional 2.7 million shares.
Guidance Revised
For 2017, Stericycle updated its guidance in accordance with the current market scenario. Earnings are currently expected in the range of $4.46-$4.52 per share, compared with $4.55-$4.69 expected earlier. The company expects revenues to be in the range of $3.54-$3.60 billion ($3.52-$3.65 billion was projected earlier), and adjusted free cash flow in the range of $450-$465 million (down from $450-$470 million). Capital expenditure is projected to be in the range of $125-$145 million (down from $125-$150 million).
Forrester Research has a long-term earnings growth expectation of 12%. It delivered an average positive earnings surprise of 30.4% in the trailing four quarters, beating estimates in each.
CSG Systems is currently trading at a forward P/E of 17.3x.
Syntel has a long-term earnings growth expectation of 10%. It delivered an average positive earnings surprise of 10.7% in the trailing four quarters, beating estimates in each.
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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.
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Stericycle (SRCL) Misses on Q3 Earnings, Trims Guidance
Waste management firm Stericycle, Inc. (SRCL - Free Report) reported lackluster third-quarter 2017 results with year-over-year decrease in earnings and revenues. GAAP earnings for the quarter were $35.4 million or 41 cents per share compared with $61.5 million or 72 cents per share in the year-ago quarter. The year-over-year decline in GAAP earnings was primarily attributable to high operating expenses.
Adjusted earnings for the reported quarter declined to $1.10 per share from $1.24 in the year-earlier quarter and missed the Zacks Consensus Estimate by 4 cents.
Stericycle, Inc. Price, Consensus and EPS Surprise
Stericycle, Inc. Price, Consensus and EPS Surprise | Stericycle, Inc. Quote
Revenues & Margins
Third-quarter revenues were $882.8 million, down 0.8% year over year and missed the Zacks Consensus Estimate of $898 million. Organic revenues for the quarter declined 0.6%. Acquisitions contributed $6.8 million to quarterly revenues while divestures reduced the same by $9.9 million.
Revenues from the United States and Canada were $708.2 million, up 0.8% year over year while International revenues decreased 7% to $174.6 million. Regulated Waste and Compliance Services revenues declined to $502.4 million from $520.4 million. Secure Information Destruction Services revenues increased $17.6 million to $204.7 million, primarily due to higher recycling revenues. Communication and Related Services revenues increased to $89 million from $87.5 million as market-leading position and unique capabilities enabled the company to serve new brands across several industries. Manufacturing and Industrial Services revenues declined $8.5 million to $86.6 million due to weakness in the global markets, cost pressures in Latin America and several hurricanes.
Gross profit (GAAP) in the reported quarter was $368 million, down 2.1% year over year. Gross margin was 41.7%, down from 42.4% in the prior-year quarter.
Acquisitions
During the reported quarter, Stericycle closed five tuck-in acquisitions (including four in the domestic market and one in the international market). The deals together contributed about $0.3 million to corporate revenues in the quarter. The worldwide acquisition pool of the company remains robust with more than $100 million in annualized revenues in multiple geographies across business lines.
Financial Position
As of Sep 30, 2017, cash and cash equivalents were $52.2 million while long-term debt (net of current portion) was $2,633.7 million.
Net cash from operating activities for the first nine months of the year was $392 million compared with $417.8 million in the year-ago period. The debt-to-EBITDA (earnings before interest, tax, depreciation and amortization) ratio was 3.5 at the quarter end. Stericycle had an unused borrowing capacity of $712 million under its revolving credit facility. During the quarter, the company repurchased 145,000 mandatory preferred convertible shares for $8.7 million. At the end of the quarter, Stericycle had authorization to purchase additional 2.7 million shares.
Guidance Revised
For 2017, Stericycle updated its guidance in accordance with the current market scenario. Earnings are currently expected in the range of $4.46-$4.52 per share, compared with $4.55-$4.69 expected earlier. The company expects revenues to be in the range of $3.54-$3.60 billion ($3.52-$3.65 billion was projected earlier), and adjusted free cash flow in the range of $450-$465 million (down from $450-$470 million). Capital expenditure is projected to be in the range of $125-$145 million (down from $125-$150 million).
Zacks Rank & Key Picks
Stericycle currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader industry are Forrester Research, Inc. (FORR - Free Report) , CSG Systems International, Inc. (CSGS - Free Report) and Syntel, Inc. , each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Forrester Research has a long-term earnings growth expectation of 12%. It delivered an average positive earnings surprise of 30.4% in the trailing four quarters, beating estimates in each.
CSG Systems is currently trading at a forward P/E of 17.3x.
Syntel has a long-term earnings growth expectation of 10%. It delivered an average positive earnings surprise of 10.7% in the trailing four quarters, beating estimates in each.
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>>