Stericycle (SRCL) Q4 Earnings Beat Estimates, Revenues Lag
Zacks Investment Research | Feb 27, 2020 08:28PM ET
Stericycle, Inc. (NASDAQ:SRCL) reported mixed fourth-quarter 2019 results wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same.
Adjusted earnings per share of 72 cents beat the consensus mark by 2.9% but declined 30.1% year over year due to sorted office paper (SOP) pricing,higher operating costs, and higher effective tax rate, which were, partially offset by lower interest expense.
Total revenues of $799.9 million missed the consensus mark by 0.4% and declined 6.2% year over year on a reported basis and 0.9% on an organic basis. The downfall was due to divestitures, which reduced revenues by $36.2 million, and macroeconomic factors of SOP pricing and foreign exchange rates, which reduced revenues by $19.3 million and $9.0 million, respectively.
Decline in the company’s Manufacturing and Industrial (M&I) and Communication and Related Services (CRS) businesses were partially offset by organic revenue growth (excluding SOP pricing) of 2% in Regulated Waste and Compliance Services (RWCS) and 1.8% in Secure Information Destruction (SID).
The company has made significant progress on its portfolio rationalization strategy and debt reduction efforts.
On Feb 7, 2020, Stericycle announced that it has inked a deal to sell its Domestic Environmental Solutions business to Harsco Corporation for $462.5 million in cash, subject to customary adjustments. The deal includes Stericycle’s M&I Services and the retail portion of Hazardous Waste Services reported under RWCS, which together employ approximately 2,000 team members across 61 facilities.
In December 2019, Stericycle completed the sale of its operations in Chile to an affiliate of Veolia for roughly $30.7 million.
Revenues by Service
RWCS revenues declined 0.2% year over year to $473.7 million. The segment accounted for 59% of total revenues.
SID revenues declined 6.7% year over year to $217.9 million. The segment contributed 27% to total revenues.
CRS revenues fell 47.4% year over year to $35.9 million. The segment accounted for 5% of total revenues.
M&I revenues of $72.4 million fell 4.9% year over year. The segment contributed 9% to total revenues.
Revenues by Geography
Revenues from the Domestic and Canada were $660.8 million, down 5.7% year over year on a reported basis and 2.1% organically. The region accounted for 83% of total revenues.
International revenues of $139.1 million fell 8.5% year over year. The region contributed 17% to total revenues.
Profitability Performance
Adjusted gross profit in the reported quarter amounted to $285.2 million, down 17.7% year over year. Adjusted gross profit margin was 35.7%, down from 40.6% in the prior-year quarter.
Adjusted EBITDA was $152.8 million, down 15.3% year over year. The decrease was driven by SOP pricing of $19.3 million and higher costs related to hazardous waste operations of $9.8 million. Adjusted EBITDA margin was 19.1%, down from 21.2% reported in the prior-year quarter.
Adjusted operating income was $122.6 million, down 18.5% year over year. Adjusted operating income margin was 15.3%, down from 17.6% in the prior-year quarter.
Stericycle, Inc. Price, Consensus and EPS Surprise
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