) delivered adjusted earnings per share (EPS) of 81 cents in the
second quarter of fiscal 2012, up 17% from 69 cents in the
prior-year quarter. Adjusted EPS beat the Zacks Consensus Estimate
by a cent.
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The quarter noted some special items including acquisition expenses
of 2 cents per share, restructuring costs and plant closure
expenses of 1 cent per share. The prior-year quarter noted
acquisition costs of 5 cents per share and expense of 1 cent per
share related to the acceleration of term loan fees. Including
these items, EPS amounted to 78 cents in the reported quarter
compared with 63 cents in the year-ago quarter.
Total revenue increased 14% year over year to $469 million in the
first quarter, at par with the Zacks Consensus Estimate.
Acquisitions contributed $36.6 million to revenues while foreign
exchange had a negative impact of $8.1 million.
Domestic revenues were $337.9 million; return and recall revenues
amounted to $29 million; and international revenues totaled $131.1
million. The domestic internal growth rate was up 9%, with small
quantity climbing up 10% and large quantity another 8%.
Cost and Margins
Cost of sales increased to $249 million in the quarter from $214
million in the year-ago quarter. Gross profit increased to $209.5
million from $186.7 million in the year-earlier quarter. However,
gross margin contracted 80 basis points year over year to 44.7%.
Selling, general and administrative expenses increased 12% to $80.6
million in the quarter from $72.3 million in the year-ago quarter.
Income from operations improved to $121 million from $109 million
in the prior-year quarter. However, operating margin declined 60
basis points year over year to 25.9%.
As of June 30, 2012, cash and cash equivalents of Stericycle
amounted to $54.2 million compared with $30.3 million as of March
31, 2012. The debt-to-capitalization ratio improved nominally to
50% as of June 30, 2012 from 51% as of March 31, 2012. Cash from
operations was $188.8 million in the first half of fiscal 2012
versus $119.7 million in the comparable period last year.
Stericycle repurchased over 38,000 shares of common stock for $2.9
million in the quarter, under its authorization program. The
company has authorization to purchase an additional 4.3 million
During the quarter, the company completed eight acquisitions, out
of which three were based in domestic locations and the rest in
Management provided EPS guidance in the range of $3.26 to $3.29 for
full year 2012 and expects revenues in the range of $1.856 billion
to $1.9 billion for the year.
Free cash flow is expected to range between $322 million and $32530
million in 2012, with capital expenditure anticipated between $63
million and $65 million.
The company is witnessing strong growth worldwide, driven by new
account acquisition and expansion of its portfolio of service
offerings. Stericycle offers multiple service offerings to its
customers, which add to the value of each account. For its small
quantity customers, the services include Steri-Safe and clinical
compliance offerings and for large quantity customers - Sharps
Management, pharma waste and Integrated Waste Services.
With currently 80% of the large quantity and 70% of the small
quantity customers using one of Stericycle's current service
offerings, the adoption of its multiple services could more than
double or even triple its revenues. Currently, shares of Stericycle
retain a Zacks #2 Rank (short-term "Buy" rating).
Based in Lake Forest, Illinois, Stericycle Inc. is a leading
provider of regulated medical waste management and product recall
and return services in the U.S. It operates a national medical
waste management network that caters to medical schools, hospitals,
and other healthcare providers. It competes with
US Ecology Inc.
Waste Management (