There's been a notable change in appetite for Stericycle, Inc. (NASDAQ:SRCL) shares in the week since its full-year report, with the stock down 12% to US$57.45. It looks like the results were pretty good overall. While revenues of US$3.3b were in line with analyst predictions, statutory losses were much smaller than expected, with Stericycle losing US$3.81 per share. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, Stericycle's eleven analysts currently expect revenues in 2020 to be US$3.26b, approximately in line with the last 12 months. Earnings are expected to improve, with Stericycle forecast to report a statutory profit of US$1.03 per share. In the lead-up to this report, analysts had been modelling revenues of US$3.31b and earnings per share (EPS) of US$1.40 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$69.56, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Stericycle analyst has a price target of US$80.00 per share, while the most pessimistic values it at US$52.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Stericycle's past performance and to peers in the same market. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.3% a significant reduction from annual growth of 4.6% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 5.2% next year. It's pretty clear that Stericycle's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Stericycle's revenues are expected to perform worse than the wider market. The consensus price target held steady at US$69.56, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Stericycle going out to 2024, and you can see them free on our platform here.
You can also view our analysis of Stericycle's balance sheet, and whether we think Stericycle is carrying too much debt, for free on our platform here.
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