Stericycle (NASDAQ: SRCL) continues to show signs of turning things around after posting solid results for the fourth quarter. While the risk removal specialist's earnings declined, that was due to a conscious decision to spend and drive organic growth, which paid off handsomely during the quarter. That said, the company is tweaking its guidance a bit to reflect continued foreign exchange headwinds.
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Stericycle results: The raw numbers
Data source: Stericycle.
What happened with Stericycle this quarter?
Cross-selling drove strong organic revenue growth in the quarter.
- Stericycle's revenue edged up 2%, or $18 million, due to several factors. While acquisitions added $5 million to the top line, the primary driver during the quarter was organic revenue growth, which was up 4.4% and more than offset the negative impact of foreign exchange, which sliced $25.8 million off the top line. In fact, if adjusting for the impact of currency fluctuations, revenue would have risen 4.9%.
- Sales in the company's core regulatedwaste and compliance service segment dipped 1.5% to $512.7 million due to foreign exchange headwinds. Meanwhile, manufacturing and industrial segment revenue slipped 7.2% to $96 million as a result of continued market headwinds, an asset sale, and currency exchange fluctuations.
- Meanwhile, sales from secure document destruction services (Shred-it) rose 4% to $185.2 million, due to strong organic growth from cross-selling and acquisitions, which more than offset currency headwinds.
- However, the star of the quarter was revenue from communications and related services, which surged 29.8% thanks to strong organic growth as a result of the company's cross-selling efforts and robust recall results.
- Earnings, meanwhile, primarily dropped due to higher selling, general, and administrative expenses, which rose from 25% of revenue in the fourth-quarter of 2015 to 32% of sales in the fourth quarter of last year.
Image source: Getty Images.
What management had to say
CEO Charlie Alutto commented on the quarter by saying:
As Alutto pointed out, the company's recall team, which helps companies manage product recalls, had its best quarter ever. CFO Brent Arnold went into a bit more detail on the company's quarterly conference call, pointing out that the success in recall was driven by a "combination of our call center expertise, reverse logistics capabilities and the dedication of our team," which "produced a record-breaking performance in the fourth quarter." Those results helped drive the robust organic revenue growth from communications and related services.
Arnold also noted one more important driver of the company's quarter, stating in the earnings release that "Shred-it synergies remain on track. We completed the integration of the inside sales and customer service teams and established standardized best practices for our operational teams. Additionally our cross selling efforts produced several sizable wins among our national and hospital accounts."
One of the things that had negatively impacted Stericycle in past quarters was the slower-than-expected integration of Shred-it. However, those issues appear to be behind the company. Instead, it seemslike Stericycle is starting to make progress driving organic growth by cross-selling its legacy services to Shred-it customers and vice versa. That's evident by the fact that organic growth overtook acquisitions as the primary driver of top-line growth during the quarter.
Despite the solid start to the year, Stericycle is adjusting its guidance downward a bit to reflect continued foreign exchange headwinds. As a result, the company sees full-year revenue in a range of$3.51 billion to $3.64 billion, which is down slightly from its prior range of $3.54 billion to $3.67 billion. The company is also trimming earnings guidance, with expectations for a range of$4.54 to $4.74 per share, down from its prior range of $4.57 to $4.77 per share.
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