Stericycle's (SRCL +0.00%) put the wraps on what was a challenging year when it reported fourth-quarter results Wednesday after the market closed. Revenue slipped versus the year-ago period, while earnings didn't budge. That said, the company has a plan to restart growth, which it outlined along with those results.
Stericycle results: The raw numbers
|
Metric |
Q4 2017 |
Q4 2016 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$887.8 million |
$906.4 million |
-2.1% |
|
Adjusted net income |
$90.9 million |
$90.7 million |
0.2% |
|
Adjusted earnings per share |
$1.00 |
$1.00 |
0% |
Data source: Stericycle.
Stericycle hopes to restart profit growth via a comprehensive turnaround plan. Image source: Getty Images.
What happened with Stericycle this quarter?
A tough comparable quarter didn't help matters:
- Stericycle's sales slipped versus the fourth quarter of last year due mainly to a record recall event in the year-ago period. As a result, sales from that segment slumped 15% year over year to $97.2 million. The company partially offset that with a 5.5% rise in revenue from its secure information destruction business, which hauled in $202.2 million in sales during the quarter.
- Two other headwinds affected the period. The company sold assets that would have generated $10.2 million in sales during the quarter, only offsetting that with $6.8 million in revenue contributions from acquisitions. In addition to that, the company continued to experience weakness in its manufacturing and industrial services business.
- For the full year, revenue rose 0.5% to $3.58 billion, which was toward the higher end of its $3.54 billion to $3.6 billion guidance range.
- Earnings after adjustments, meanwhile, didn't budge versus the year-ago quarter thanks to lower profit margins. As a result, the company's full-year adjusted profit only came in at $4.34 per share, which was 4.2% lower than last year's result, and well below the low end of the company's $4.46 to $4.52 per-share guidance range.
- Stericycle generated $116.6 million in cash flow from operations during the quarter, raising its full-year total to $508.6 million, which was 9.8% less than last year. The company invested $143 million into capital projects, leaving it with about $365 million in free cash flow. Stericycle used that money to pay $36.3 million in preferred share dividends, repurchase $34.2 million of those preferred shares, pay off $256.2 million in debt, and make $52.5 million in acquisitions.
What management had to say
CEO Charlie Alutto commented on the company's plans to turn around its financial results by saying:
Stericycle has evolved significantly over the past 28 years, and today we are executing a companywide, comprehensive strategy to position Stericycle for continued success well into the future. Our strategy focuses on building a best-in-class enterprise performance management ("EPM") operating model and includes streamlining our portfolio, realigning our processes and organizational structure to drive efficiency, and implementing an enterprise resource planning ("ERP") system. We believe that the implementation of our strategic plan, combined with the continued trend of customers outsourcing services to focus on their core businesses, will accelerate Stericycle's growth and profitability across our markets and deliver greater value to our shareholders.
The company put some numbers behind that outlook, estimating that adjusted earnings per share would grow at a 6% to 10% compound annual rate through 2022. Further, the company believes this plan will generate substantial free cash flow, with it anticipating a 10% to 14% compound annual growth rate over that timeframe.
Looking forward
Stericycle expects its strategy to start paying immediate dividends. While it does anticipate revenue slipping about 1% at the midpoint of its guidance, that's due to the expectation that it will sell some non-core assets. Adjusted earnings, on the other hand, should rise to a range of $4.45 to $4.85 per share this year, up about 7% at the midpoint from 2017. Meanwhile, the company expects free cash flow to be between $330 million to $400 million this year, which, at the midpoint would match last year's level due to higher planned capital investments.
