Stericycle, Inc. SRCL has undertaken a multi-year business transformation initiative aimed at improving long-term operational and financial outcomes. The company has been benefiting from its acquisition policy and is expected to reap continued favorable outcomes from the same. However, the highly competitive market is a challenge for SRCL.
Stericycle, Inc. reported better-than-expected first-quarter 2023 results. Quarterly earnings per share came in at 49 cents, beating the Zacks Consensus Estimate and increasing 53.1% year over year. Revenues of $684.3 million surpassed the consensus mark by 1.9% and increased 3% year over year. Organic revenues increased 7.2% year over year.
Current Situation of Stericycle
The multi-year business transformation initiative is boding well for Stericycle. The initiative focuses on improving the quality of revenues, driving operational efficiency through work measurement, asset optimization, technology, strategic sourcing; portfolio rationalization through divestitures; debt reduction; leverage improvement and ERP implementation. By improving in these aspects, Stericycle aims to enhance its operational and financial performance.
The company has been performing well on the acquisition front. In 2021, Stericycle acquired a Midwest-based regulated waste business for $43.4 million, which strengthened its independent customer base in North America. The company increases its customer base by virtue of acquisitions and thus provides a long-term growth platform for selling multiple services.
Stericycle, Inc. Revenue (TTM)
Stericycle, Inc. revenue-ttm | Stericycle, Inc. Quote
Stericycle’s current ratio was 0.97 at the end of first-quarter 2023, higher than 0.90 recorded at the end of second-quarter 2022 and the prior-year quarter’s 0.92. An increase in the current ratio signifies that the company may not face problems in meeting its short-term debt obligations.
Some Concerning Points
Stericycle operates in a market with heavy competition and limited barriers to entry. Due to intense competition and pressure from customers Stericycle has reduced prices to retain its existing customers and attract new ones.
The company’s global presence makes it vulnerable to foreign currency exchange rate, which takes a toll on the bottom line. In 2022, revenues were impacted to the tune of $53.4 million due to unfavorable foreign exchange rates.
SRCL’s shares have declined 13.6% in the past year against the industry’s 3.8% increase.
Zacks Rank and Stocks to Consider
SRCL currently carries a Zacks Rank #3 (Hold).
Investors interested in the Zacks Business Services sector can consider the following stocks:
Green Dot GDOT: For second-quarter 2023, the Zacks Consensus Estimate of Green Dot’s revenues suggests a year-over-year decline of 4.5% to $339.2 million and the same for earnings indicates a 56.8% plunge to 32 cents per share. The company has an impressive earning surprise history, beating the consensus mark in all four trailing quarters, the average surprise being 37.3%.
GDOT has a Value score of A and currently sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Maximus MMS: For second-quarter 2023, the Zacks Consensus Estimate of Maximus’ revenues suggests a year-over-year increase of 6.1% to $1.2 billion and the same for earnings indicates a 46.2% rise to $1.14 per share. The company has an impressive earning surprise history, beating the consensus mark in three instances and missing on one instance, the average surprise being 9.6%.
MMS has a VGM score of A and a Zacks Rank of 2.
Rollins ROL: For second-quarter 2023, the Zacks Consensus Estimate of Rollins’ revenues suggests year-over-year growth of 12.8% to $805.2 million and the same for earnings indicates a 15% increase to 23 cents per share. The company has an impressive earning surprise history, beating the consensus mark in three of the four trailing quarters and missing on one instance, the average surprise being 5.53%.
ROL currently carries a Zacks Rank of 2.
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