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What Lies Ahead for Stericycle (SRCL) this Earnings Season?

Waste management firm Stericycle, Inc.SRCL is scheduled to report fourth-quarter 2016 results after the closing bell on Feb 15. In the last reported quarter, adjusted earnings comfortably exceeded the Zacks Consensus Estimate by 6 cents. The company has a mixed earnings surprise history with two beats and a miss in the trailing four quarters with an average positive surprise of 1.1%.

Let's see how things are shaping up for this announcement.

Key Factors in the Quarter

During the to-be-reported quarter, Stericycle completed the acquisition of Shred-it International. The acquisition will strengthen Stericycle's growth opportunities by providing additional business-to-business compliance solutions, leveraging its existing core capabilities, and expanding its foothold worldwide. This is likely to generate incremental revenues during the impending quarter.

However, the overall hazardous waste market remains a challenge for Stericycle as this has led to increased competition for available volume. Such market conditions have reduced revenues and profitability of the company's manufacturing and industrial waste business. The company is also witnessing increased pricing pressure from its SQ (small quantity) customer base. This is a result of the consolidation of physician practices by hospitals and the overall healthcare cost pressures resulting from managed care.

High operating costs continue to be a headwind for Stericycle. In addition, a challenging macroeconomic environment and volatility in foreign exchange are affecting margins and the bottom line.

In addition, Stericycle operates in a highly competitive market. The barriers to entry into the regulated waste collection and disposal business and the pharmaceutical returns business are very low. Competitors also resort to aggressive pricing to gain market share. This erodes the profitability of the company and will likely lead to lower earnings in the to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Stericycle is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Stericycle, Inc. Price and EPS Surprise

Stericycle, Inc. Price and EPS Surprise | Stericycle, Inc. Quote

Zacks Rank: Stericycle has a Zacks Rank #4 (Sell).

As it is we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Chesapeake Lodging Trust CHSP has an Earnings ESP of + 2.17% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

STAG Industrial, Inc. STAG has an Earnings ESP of +2.50% and a Zacks Rank #3.

CubeSmart CUBE has an Earnings ESP of +2.70% and a Zacks Rank #3.

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Stericycle, Inc. (SRCL): Free Stock Analysis Report

Stag Industrial, Inc. (STAG): Free Stock Analysis Report

CubeSmart (CUBE): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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