Stericycle Delivers Underwhelming Fourth Quarter, but Business Transformation Is Still Materializing

Narrow-moat-rated Stericycle posted fourth-quarter results that were slightly below our expectations. Revenue of $670 million missed FactSet consensus by approximately 4% but EPS of $0.60 was in line. Management mostly reaffirmed its long-term outlook but made a downward revision to its 2025 free cash flow guidance (previously $400 million) to a range of $325 million-$375 million. Shares plummeted over 11% on Feb. 23 as a result. We lowered our fair value estimate by 3% to $59 per share due to the weaker cash flow outlook. Nonetheless, we believe Stericycle’s initiatives to drive operational efficiencies across the business are beginning to materialize and provide a pathway to further margin expansion.