Stericycle (NASDAQ:SRCL) once again showed signs that it's turning things around, delivering a mild rise in revenue while keeping its profit decline to a minimum. While the company continues to battle against two persistent headwinds, it's beginning to grow past those issues.  

Stericycle Results: The Raw Numbers

Metric

Q1 2017

Q1 2016

Year-Over-Year Change

Revenue

$892.4 million

$874.2 million

2.1%

Adjusted net income

$99.4 million

$101.3 million

(1.9%)

Adjusted EPS

$1.09

$1.11

(1.2%)

Data source: Stericycle.  

Shredded paper closeup.

Image source: Getty Images.

What happened with Stericycle this quarter?

Organic sales growth continues to be the story.

  • Stericycle's revenue rose $18.2 million versus last year's first quarter. Driving that growth was a mix of acquisitions, which added $10 million to the top line and an $18.7 million organic rise in revenue. That said, an asset sale sliced $0.7 million from the top line while foreign exchange headwinds lopped off another $9.7 million in sales. Without the impact of exchange rates, revenue would have increased 3.2% versus last year.
  • Sales in the company's secure information and destruction service segment continue to grow at a brisk pace, up 8% to $204.1 million. Meanwhile, revenue from the communication and related services segment was up 6.3% to $93.5 million, and sales in the company's core regulated waste and compliance services segment rose 1.5% to $511.2 million.
  • The lone laggard continues to be the manufacturing and industrial services division, where sales dropped 9.6% to $83.6 million.
  • Profitability continued to slide due in part to higher costs. One of the culprits was an increase in selling, general and administrative expenses, which were 22.2% of total sales, up from 21.3% in the year-ago period.
  • That said, cash flow from operations was up a robust 11.7% to $175.3 million.

What management had to say

CEO Charlie Alutto commented on the results by saying:

We are off to a great start for 2017. Our Secure Information Destruction business grew 8% organically from an increase in sales of ongoing and one-time services combined with higher revenues for recycled paper. Additionally, the market-leading position and unique capabilities of our Communication and Related Services business enabled the team to deliver solid year-over-year organic growth of greater than 6%.

The persistent headwinds of foreign exchange fluctuations and declining sales to manufacturing and industrial customers continue to impact results negatively. However, Stericycle is pushing back by posting strong organic sales growth in both its secure information destruction business and communications and related services. Because of that, the company remains on a good pace for the year.

Looking forward

Thanks to that solid start, the company tweaked its full-year guidance just a bit. It now sees revenue coming in between $3.53 billion to $3.66 billion, which is slightly more than its prior range of $3.51 billion to $3.64 billion. Likewise, it trimmed earnings expectations ever so slightly, with the company now projecting earnings coming in between $4.55 to $4.75 per share, a bit more than its prior range of $4.54 to $4.74 per share. 

Looking out a bit longer term, Stericycle expects revenue to organically grow by 3% to 5% per year, with the potential for an additional upside of 1% to 2% annually. In the meantime, the company believes that continued acquisitions and share repurchases will supplement organic growth and create additional shareholder value.

Matt DiLallo owns shares of Stericycle. The Motley Fool recommends Stericycle. The Motley Fool has a disclosure policy.