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Stericycle's (SRCL) Debt Woes Stay Amid Focus on Transformation

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Stericycle, Inc. SRCL has a comprehensive multiyear Business Transformation initiative in place, focused on enhancing long-term operational and financial performance. However, a debt-laden balance sheet remains a concern for the company.

Stericycle recently reported mixed fourth-quarter 2020 results, with earnings missing the Zacks Consensus Estimate and revenues surpassing the same. Adjusted earnings per share of 59 cents missed the Zacks Consensus Estimate by 7.8% and declined 18.1% year over year. Revenues of $655.9 million surpassed the consensus mark by 1.5% but declined 18% year over year.

The company’s shares have gained 26% over the past year, outperforming the 1.3% rally of the industry it belongs to.

Stericycle's cash and cash equivalent balance of $53.3 million at the end of the fourth quarter was well below the long-term debt level of $1.69 billion, underscoring that the company does not have enough cash to meet this debt burden. Also, the cash level cannot meet the short-term debt of $91 million.

The company’s Communication and Related Services (“CRS”) business have been weak for quite some time, weighing on its top line. The CRS business is witnessing lower revenues due to decline in recall events and lower call volumes in communication solutions. Revenues fell 43% year over year to $33.6 million in fourth-quarter 2020.

Nevertheless, Stericycle is progressing well with its comprehensive multi-year Business Transformation initiative aimed at improving long-term operational and financial performance. Key focus areas of the program include improving quality of revenue, driving operational efficiency through work measurement, asset optimization, technology, strategic sourcing, portfolio rationalization through divestitures, debt reduction and leverage improvement, and ERP implementation.

Zacks Rank and Stocks to Consider

Stericycle currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader Zacks Business Services sector are The Interpublic Group of Companies IPG, Cross Country Healthcare CCRN and Charles River Associates CRAI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term expected earnings per share (three to five years) growth rate for Interpublic, Cross Country Healthcare and Charles River is pegged at 2.4%, 12% and 13%, respectively.

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Stericycle, Inc. (SRCL) : Free Stock Analysis Report

Charles River Associates (CRAI) : Free Stock Analysis Report

Interpublic Group of Companies, Inc. The (IPG) : Free Stock Analysis Report

Cross Country Healthcare, Inc. (CCRN) : Free Stock Analysis Report

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