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Stericycle (SRCL) Hits New 52-Week High: What's Driving It?

Zacks Equity Research

Shares of Stericycle, Inc. SRCL scaled a new 52-week high of $65.49 in the trading session on Dec 5, before closing a tad lower at $64.93.

The company’s shares have charted a solid trajectory in recent times, appreciating 77.1% year to date, ahead of the 22.6% growth of the industry it belongs to.

 

Notably, Stericycle has witnessed a 12.8% rise in share price since it posted third-quarter 2019 results.

Let’s find out what’s supporting the uptick.

Strategic Acquisitions Bode Well

Stericycle’s acquisition pool remains robust in multiple geographies and lines of business. The company had completed 21, 30 and 31 acquisitions, respectively, in 2018, 2017 and 2016.

Global acquisition strategy increases Stericycle’s customer base by providing a long-term growth platform for selling multiple services. In 2018, 2017 and 2016, acquisitions contributed $29.7 million, $32.2 million and $570.1 million to revenues, respectively. In the first nine months of 2019, acquisitions contributed $9.3 million to revenues.

The company is continuously on the lookout for acquisitions that will grow its market share and expand geographic base.

Multiyear Business Transformation Scheme: A Key Catalyst

Stericycle is progressing well with its comprehensive multiyear Business Transformation, aimed at improving long-term operational and financial performance. 

As part of the portfolio rationalization strategy within Business Transformation, Stericycle completed five divestitures — the North American telephone answering services business, a retail pharmaceutical returns business, all of its Mexican operations, its remaining hazardous waste business in the United Kingdom and the U.S. non-core clean room services business — since its initiation in 2017.

The company is looking for alternatives for the CRS business and other non-core assets and geographies. It has divested the U.K.-based texting business, which had been part of CRS. The company is progressing well with the ERP implementation.

Evidently, Stericycle earned $38.1 million of gross proceeds (from the divestitures completed during October 2019) and plans to use it to reduce net debt in the fourth quarter of 2019.

Updated 2019 EPS Guidance

Stericycle raised the low end of its adjusted earnings per share guidance for 2019. Adjusted EPS for 2019 is now anticipated to be $2.55-$2.70 million compared with the previously guided range of $2.50-$2.85 million.

Zacks Rank & Stocks to Consider

Currently, Stericycle carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are Global Payments GPN, Mastercard MA and Cardtronics CATM. While Global Payments and Cardtronics sport a Zacks Rank #1 (Strong Buy), Mastercard carries a Zacks Rank #2 (Buy).

Long-term expected EPS (three to five years) growth rate for Global Payments, Mastercard and Cardtronics is 17.3%, 16% and 4%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

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