Stericycle Inc (NASDAQ:SRCL) reported its second-quarter results after the closing bell on Thursday. The medical waste-disposal specialist cleaned up a mess left by the strong dollar to report robust revenue growth. As a result, it beat analysts' estimates on both the top and bottom lines 

A look at the numbers
Stericycle reported revenue of $715.7 million, which was up $74.9 million, or 11.7%, from the second quarter of last year. Revenue also beat analysts' estimates by roughly $12 million. Driving much of this growth was acquisitions, which kicked in $58.9 million toward the company's revenue growth.

Further, the combination for organic and acquired growth enabled the company to easily overcome a $27.3 million unfavorable impact from foreign exchange rates as a result of the strong dollar. If it wasn't for that negative impact, revenue would have increased 15.9% year over year.

This stronger-than-expected revenue growth pushed non-GAAP gross profit, which adjusts for acquisition costs and other items, up 10.5%, to $305.3 million. Meanwhile, non-GAAP earnings per share came in at $1.14, which was up 9.7% from last year and just beat the most recent consensus estimate by $0.01 per share. It's worth noting that the company's profitability didn't grow quite as fast as revenue, which is the result of non-GAAP gross profit as a percentage of earnings slipping from 43.1% in the second quarter of last year to 42.7% this quarter.

What to keep an eye on in the future
Ideally, investors like to see margins expand and not contract, especially for a growth-by-acquisition company, as the company should be able to wring out cost synergies and improve the margins at the acquired company. For example, subsequent to the quarter's end, the company announced that it was acquiring global secure information destruction service provider Shred-it in a $2.3 billion deal.

The company expects the deal to close by the end of the year, and it should be accretive to earnings per share by 10% next year, and in the mid-to-high teens in 2018. That accretion is partially the result of $20 million-$30 million in cost synergies that the company expects to deliver by 2018. Given its acquisition history, having completed more than 400 deals since 1993, the company should be an expert at wringing out merger synergies to boost its margins, so that is certainly something to keep an eye on going forward.

The margin weakness aside, one very encouraging thing to see was that the company delivered solid organic growth in the quarter. Of the year-over-year growth in revenue, organic growth accounted for 21% of that growth this quarter after only accounting for 8% of growth last quarter. A solid combination of both organic and acquired growth is exactly what investors want to see from the company each quarter.

Investor takeaway
Stericycle's results were quite solid as the company more than overcame headwinds from foreign currencies to deliver stronger-than-expected revenue growth. While it wasn't a perfect quarter as margins were a bit compressed, which muted earnings growth, the company did deliver solid organic growth to help make up for those weaknesses.

Looking ahead, the company has locked in strong acquired growth via its recently announced Shred-it acquisition, though investors should keep an eye on the deal to make sure the company delivers on its targets.

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