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Stericycle (SRCL) Posts Disappointing Q1 Earnings, Stock Down

Zacks Equity Research

Stericycle, Inc. SRCL reported lower-than-expected first-quarter 2019 results, in response to which shares fell 14.4% in the after-hours trading.

Adjusted earnings of 57 cents per share lagged the Zacks Consensus Estimate by 30 cents and decreased 52.9% year over year.

The decrease was due to lower revenues, higher operating costs, impacts of extreme weather conditions, a non-cash goodwill impairment charge associated with Latin America, higher interest expenses and effective tax rate and the absence of gains on share repurchases.

Total revenues came in at $830.1 million, which missed the consensus mark by $34 million and declined 7.3% year over year on a reported and 3.9% on an organic basis.

Effects of foreign exchange and divestitures reduced revenues by $24.9 million and $11.9 million, respectively. Extreme weather conditions and one less operating day compared to the same quarter last year also impacted revenues. Acquisitions contributed $6.8 million to the top line.

The company continued its progress with Business Transformation in the quarter and made additional investments toward development of its comprehensive enterprise resource planning (ERP) platform.

Shares of Stericycle gained 56.1% year to date, significantly outperforming the 20.2% rally of the industry it belongs to.

 

 

Let’s check the numbers in detail.

Revenues by Service

Regulated Waste and Compliance Services revenues declined 5.7% year over year on a reported basis and 2% organically to $469.2 million. Secure Information Destruction Services revenues increased 5.5% year over year on a reported basis and 4.3% organically to $232 million.

Communication and Related Services revenues fell 33.4% year over year on a reported basis and 30.5% organically to $61.2 million. Manufacturing and Industrial Services revenues fell 21.1% year over year on a reported basis and 7.3% organically to $67.7 million.

Stericycle, Inc. Revenue (TTM)

 

Stericycle, Inc. Revenue (TTM) | Stericycle, Inc. Quote

Revenues by Geography

Revenues in the Domestic and Canada segment totaled $678.8 million, down 5% year over year on a reported basis and 5.3% organically. The region contributed 82% to total revenues. International revenues fell 16.1% year over year to $151.3 million. It improved 1.9% organically. The region contributed 18% to total revenues.

Profitability Performance

Adjusted gross profit in the reported quarter amounted to $300.7 million, down 16.1 year over year. Adjusted gross profit margin was 36.2%, down from 40.1% in the prior-year quarter.

Adjusted EBITDA was $136.8 million, down 27.7% year over year. Adjusted EBITDA margin was 16.5%, down from 21.2% in the prior-year quarter.

Adjusted operating income was $105 million, down 33.8% year over year. Adjusted operating income margin was 12.6%, down from 17.7% in the prior-year quarter.

Balance Sheet & Cash Flow

Stericycle exited the quarter with cash and cash equivalents of $48.2 million compared with $34.3 million at the end of the prior quarter. Long-term debtwas $2.7 billion, roughly flat with the prior-quarter’s figure.

The company generated $36.2 million of cash from operating activities and capex was $66.1 million in the quarter.

2019 Guidance

The company reaffirmed its 2019 guidance.EPS is expected in the range of $3.32 to $3.72, the midpoint ($3.52) is higher than the current Zacks Consensus Estimate of $3.45.

Revenues are anticipated in the range of $3.408-$3.533 billion, the midpoint (3.47 billion) of which is higher than the Zacks Consensus Estimate of $3.45 billion. Adjusted EBITDA margin is projected between 19.4% and 20.1%.

Zacks Rank & Upcoming Releases

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

Investors interested in the broader Zacks Business Services sector are awaiting first-quarter 2019 earnings of key players like FLEETCOR Technologies FLT, Gartner IT and Equifax EFX

) .While FLEETCOR and Gartner are slated to report on May 7, Equifax is scheduled to release results on May 10.

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