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Stericycle (SRCL) Q1 Earnings: Is Disappointment in Store?

Zacks Equity Research
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Will Best Buy (BBY) Beat Estimates Again in Its Next Earnings Report?

Best Buy (BBY) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.

Stericycle, Inc. SRCL is slated to report first-quarter 2018 results on May 3, after market close.

The top line is expected to decline on the back of lower organic revenue growth and unfavorable impact of buyouts. Non-cash goodwill impairment charges and expenses related to business transformation are likely to hurt the bottom line.

We observe that shares of Stericycle have declined 31.5% in the past year, significantly underperforming the industry’s gain of 2.7%.

Revenue Expectations

The Zacks Consensus Estimate for revenues for first-quarter 2018 stands at $885.15 million, reflecting year-over-year decline of 0.8%. We expect the company to witness top line contraction on the back of lower organic revenue growth and unfavorable impact of divestures.

In fourth-quarter 2017, revenues declined 2.1% year over year to $887.8 million (inclusive of $10.2 million reduction in revenues due to divestitures and a loss of 2.6% of organic revenues). However, acquisitions had a positive impact of $6.8 million.

Earnings to Decline Year Over Year

The Zacks Consensus Estimate for earnings in the to-be-reported quarter is pegged at $1.04 per share, indicating year-over-year decline of 4.6%.

The company’s earnings are likely to be negatively impacted by non-cash goodwill impairment charges and expenses related to business transformation. These headwinds are expected to offset the tax benefits from the new tax law (Tax Cuts and Jobs Act).

In fourth-quarter 2017, adjusted earnings of $1.00 per share remained flat with the prior-year quarter. The company witnessed a tax benefit (as a result of lower tax) of $129.8 million.

Our Model Doesn’t Suggest a Beat

Please note that according to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if the companies are witnessing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stericycle currently has a Zacks Rank #4 and an Earnings ESP of 0.00%, a combination that makes surprise prediction difficult.

Stocks to Consider

Here are some stocks from the broader Business Services sector that investors may consider, as our model shows that these have the right combination of elements to beat on earnings in their respective upcoming releases:

Paychex, Inc. PAYX has an Earnings ESP of +9.28% and a Zacks Rank #3. The company is expected to report fourth-quarter fiscal 2018 on Jun 27. You can see the complete list of today’s Zacks #1 Rank stocks here.

FactSet Research Systems Inc. FDC has an Earnings ESP of +0.23% and a Zacks Rank #3. The company is expected to report third-quarter fiscal 2018 on Jun 26.

Veritone, Inc. VERI has an Earnings ESP of +9.63% and a Zacks Rank #3. The company is slated to report first-quarter 2018 on May 8.

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