Company Reports

We’re maintaining our $60 per share fair value estimate for shares of Stericycle following its first-quarter earnings release. Stericycle’s stock price fell nearly 7% on April 25, perhaps due to the firm’s first-quarter revenue falling about 2% short of the FactSet consensus estimate. And while Stericycle’s organic revenue declined roughly 1% year over year, that decline was due to lower recycling revenue (from lower paper prices) and less fuel and environmental surcharges from the secure information destruction services, or SIDS, segment. However, the larger regulated waste and compliance services segment (67% of first-quarter revenue) realized 2% organic growth during the quarter. Management’s full-year organic revenue growth guidance is unchanged at 3%-5%.

Narrow-moat-rated Stericycle’s stock surged over 10% intraday on Feb. 28 after the firm reported solid fourth-quarter results and issued strong 2024 guidance. We believe the market is becoming more confident in Stericycle’s turnaround story. We had believed 2024 would be an inflection point for Stericycle, as management’s many efforts to improve the firm’s operations would finally begin to bear fruit and result in noteworthy margin expansion. And, indeed, management sees adjusted EBITDA growth of approximately 14% in 2024 on 3%-5% organic revenue growth, approximately in line with our previous expectations. After making modest tweaks to our five-year financial outlook, we’ve raised our fair value estimate for Stericycle to $60 per share, from $59 previously.

Since its founding in 1989, Stericycle had been extremely acquisitive, having purchased more than 500 companies. This strategy led to a lengthy period of impressive growth, and the firm built unmatched scale. However, acquisitions began to stray from Stericycle's core competencies, and poor integration efforts caused inefficiencies to build. After decades of strong growth and profitability, Stericycle's financial performance began to deteriorate in 2017.

Since its founding in 1989, Stericycle had been extremely acquisitive, having purchased more than 500 companies. This strategy led to a lengthy period of impressive growth, and the firm built unmatched scale. However, acquisitions began to stray from Stericycle's core competencies, and poor integration efforts caused inefficiencies to build. After decades of strong growth and profitability, Stericycle's financial performance began to deteriorate in 2017.

Putting aside lower recycled sorted office paper prices and surcharges compared with the year-ago quarter and revenue lost with divestitures, we thought Stericycle reported solid third-quarter results. The company’s competitively advantaged regulated waste and compliance services segment (67% of sales) reported 4% organic revenue growth, primarily driven by pricing actions. And while the secure information destruction services business saw a 12% decline in organic revenue, that decline was almost entirely due to lower paper prices and fuel and environmental surcharges. Nevertheless, Stericycle is better protected from paper price volatility now than in the past due to contract adjustments implemented by the current management team.

Since its founding in 1989, Stericycle had been extremely acquisitive, having acquired over 500 companies. On the surface, this acquisitive strategy led to a lengthy period of impressive growth and the firm built unmatched scale. However, acquisitions began to stray from Stericycle's core competencies and poor integration efforts caused inefficiencies to build. After decades of strong growth and profitability, Stericycle's financial performance began to deteriorate in 2017.

Since its founding in 1989, Stericycle had been very acquisitive, having acquired over 500 companies. On the surface, this acquisitive strategy led to a lengthy period of impressive growth and the firm built unmatched scale. However, acquisitions began to stray from Stericycle's core competencies and poor integration efforts caused inefficiencies to build. After decades of strong growth and profitability, Stericycle's financial performance began to deteriorate in 2017. However, with a refreshed management team, led by CEO Cindy Miller, Stericycle’s much-needed turnaround strategy has progressed well. It has: 1) divested almost 20 noncore, low-margin businesses; 2) achieved its goal of reducing the firm’s debt leverage ratio to below 3 (it was 2.7 at the end of the second quarter); 3) been reinvesting in its competitively advantaged medical waste collection and disposal business, with improvements to its autoclave and incinerator infrastructure (including a new incinerator in Nevada)—and perhaps more fleet-related investment in the future; 4) moved the enterprise resource planning system implementation toward completion; and 5) implemented much-needed oversight and standardization across the company, which has improved revenue quality and operational efficiencies.

Narrow-moat Stericycle reported second-quarter results featuring a 1.5% year-over-year revenue decline and an operating loss of $24 million. The market reacted negatively to the results, and the stock traded down nearly 10% on July 27. We believe this reaction was unwarranted as underlying fundamentals remain solid. Excluding the effect of divestitures and foreign currency exchange, Stericycle achieved organic sales growth of 2.3% and adjusted EBITDA margin of 15.2%. Management also reaffirmed full-year guidance, which targets 3%-5% organic revenue growth and free cash flow of $175 million-$205 million. We maintain our $60 per share fair value estimate, and we believe Stericycle's stock is undervalued.

Since its founding in 1989, Stericycle had been extremely acquisitive, having acquired over 500 companies. On the surface, this acquisitive strategy led to a lengthy period of impressive growth and the firm built unmatched scale. However, acquisitions began to stray from Stericycle's core competencies and poor integration efforts caused inefficiencies to build. After decades of strong growth and profitability, Stericycle's financial performance began to deteriorate in 2017.

Stericycle delivered strong first-quarter results as contract pricing levers prompted better-than-expected organic growth and provided a boost to gross margin. Revenue of $684 million and adjusted EPS of $0.49 outpaced FactSet consensus by 2% and 11%, respectively. Management reiterated its full-year guidance for 3%-5% organic revenue growth and adjusted EPS in the range of $1.75-$2.05. Shares jumped by high-single digits on April 27 as a result. We are encouraged by Stericycle’s solid profit performance in the first quarter as operational efficiencies and contract negotiations continue to materialize. We've maintained our $59 per share fair value estimate because our long-term outlook remains intact.

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.

Since its founding in 1989, Stericycle had been extremely acquisitive, having acquired over 500 companies. On the surface, this acquisitive strategy led to a lengthy period of impressive growth and the firm built unmatched scale. However, acquisitions began to stray from Stericycle's core competencies and poor integration efforts caused inefficiencies to build. After decades of strong growth and profitability, Stericycle's financial performance began to deteriorate in 2017.

Stericycle’s stock rallied over 6% on Nov. 3 after the narrow-moat-rated firm posted strong third-quarter results. Revenue of $690 million and adjusted EPS of $0.65 outpaced FactSet consensus by 2% and 12%, respectively. Management raised its full-year organic revenue guidance to 5%-7% (4%-6% previously) while reaffirming its adjusted EPS ($2.00-$2.15) and free cash flow ($80 million-$100 million) targets. Strong pricing gains and continued operational efficiencies were apparent during the quarter. We believe Stericycle’s operational initiatives are materializing into improved financial performance, and we remain encouraged by the firm’s progress. We raised our fair value estimate 3% to $61 primarily due to the time value of money as our long-term outlook remains intact.

Since its founding in 1989, Stericycle had been extremely acquisitive, having acquired over 500 companies. On the surface, this acquisitive strategy led to a lengthy period of impressive growth and the firm built unmatched scale. However, acquisitions began to stray from Stericycle's core competencies and poor integration efforts caused inefficiencies to build. After decades of strong growth and profitability, Stericycle's financial performance began to deteriorate in 2017.

Narrow-moat-rated Stericycle's second-quarter performance featured solid organic revenue growth and sequential margin expansion. Sales of $680 million and adjusted EPS of $0.48 slightly outpaced FactSet consensus estimates. The stock reacted positively to the results (it closed the Aug. 5 trading day up 7%), as Stericycle’s financial performance had languished behind consensus in previous quarters. Management modestly raised its full-year organic revenue growth guidance to 4%-6% (from 3%-5% previously) , primarily because of favorable pricing developments within the business. However, management lowered its adjusted EPS and free cash flow guidance to reflect higher inflationary operating expenses, working capital adjustments, and FCPA settlement payments. We maintain our fair value estimate of $59 per share.

Since its founding in 1989, Stericycle has been extremely acquisitive, having acquired over 500 companies. On the surface, this acquisitive strategy led to a lengthy period of impressive growth and the firm built unmatched scale. However, acquisitions began to stray from Stericycle's core competencies and poor integration efforts caused inefficiencies to build. After decades of strong growth and profitability, Stericycle's financial performance began to deteriorate in 2017.

Since its founding in 1989, Stericycle has been extremely acquisitive, having acquired over 500 companies. On the surface, this acquisitive strategy led to a lengthy period of impressive growth and the firm built unmatched scale. However, acquisitions began to stray from Stericycle's core competencies and poor integration efforts caused inefficiencies to build. After decades of strong growth and profitability, Stericycle's financial performance began to deteriorate in 2017.

Stericycle's stock sold off sharply on April 28 after the narrow-moat-rated firm's first-quarter financial results came in short of sell-side consensus expectations. According to FactSet data, Stericycle's revenue and adjusted EPS missed the mean consensus estimates by 1% and 31%, respectively. Nevertheless, management maintained its 2022 financial guidance for 3%-5% revenue growth (off a $2.6 billion revenue base), adjusted EPS of $2.00-$2.30, and free cash flow of $125 million-$155 million. While Stericycle's first-quarter gross profit margin (36.8%) was lower than we had anticipated due to continued supply chain and inflationary headwinds, we believe management's efforts to improve price realization will become more apparent during the second half of 2022 (that is, we expect to see sequential gross margin improvement). Management said that additional fees and surcharges should add $25 million of incremental revenue in 2022. After reviewing our key valuation assumptions, we're maintaining our $59 fair value estimate. We continue to forecast Stericycle's top line growing at about a 4% compound annual rate through 2026 with EBITDA margin expanding to approximately 23.5%.

Since its founding in 1989, Stericycle has been extremely acquisitive, having acquired over 500 companies. On the surface, this acquisitive strategy led to a lengthy period of impressive growth and the firm built unmatched scale. However, acquisitions began to stray from Stericycle's core competencies and poor integration efforts caused inefficiencies to build. After decades of strong growth and profitability, Stericycle's financial performance began to deteriorate in 2017.

We've maintained our $59 per share fair value estimate following Stericycle's fourth-quarter 2021 earnings release. Stericycle reported solid organic revenue growth (3.5%), but inflationary headwinds and ongoing enterprise resource planning spending weighed on the firm's adjusted operating margin, which contracted 680 basis points to 9.8%. Nevertheless, Stericycle's fourth-quarter revenue ($657.3 million) and adjusted EPS ($0.38) were not far from our forecast ($671.8 million and $0.41, respectively).