Why Stericycle Stock Is Sinking Today

The medical waste disposal and secure information destruction company missed analysts' expectations for earnings due to higher costs.

Matthew DiLallo
Matthew DiLallo
Feb 22, 2018 at 1:36PM

What happened

Shares of Stericycle Inc (NASDAQ:SRCL) are slumping today, down 17% as of 12:30 p.m. EST, after the company announced lackluster fourth-quarter results.

So what

Stericycle reported $887.8 million in revenue during the quarter, which came in a bit higher than expected and helped push full-year sales to $3.58 billion, up 0.5% from last year and toward the upper end of its $3.54 billion-$3.6 billion guidance range. Profits, however, missed the mark. Overall, adjusted earnings came in at $1.00 per share, which was flat with 2016 and $0.14 below the consensus estimate. As a result, full-year earnings were just $4.34 per share, which was 4.2% below last year's result and less than the company's guidance for $4.46 to $4.52 per share.

Falling stock chart superimposed over digital map of the globe

Image source: Getty Images.

The main issue was a big spike in selling, general, and administrative expenses, which ballooned 23% to $367 million during the quarter. That said, Stericycle did unveil a plan to turn around its sinking profitability, which includes selling non-strategic assets, optimizing its operations, improving efficiency, and leveraging its scale. The company believes this transformation will drive 6% to 10% compound annual growth in adjusted earnings per share through 2022 and 10% to 14% compound annual growth in free cash flow over that time frame.

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Now what

Stericycle has been stuck in a rut for quite some time due to in part to headwinds in its manufacturing and industrial services business. However, it has a plan to get out of this rough patch by undertaking a comprehensive strategy to reaccelerate growth and profitability. The company fully believes that this plan will begin paying off this year, estimating that it can grow earnings 7% even though it expects revenue to dip.