Stericycle

SRCL · NASDAQ

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The case for and against

Updated Oct 30, 2024

Bull case

Stericycle is poised for growth, having generated $112 million in free cash flow in 2023, which supports a robust financial foundation. The company's efforts in workforce management and commercial enhancements are expected to improve normalized margins by 150 basis points in 2024, contributing to anticipated EBITDA growth of approximately 14% from a normalized base. Additionally, Stericycle's global reach, with 20% of revenue coming from outside North America, positions it favorably for continued demand recovery, particularly as geographies normalize post-pandemic.

Bear case

Stericycle has experienced a decline in its revenues, with a year-over-year decrease of 4.1% to $212 million, attributed primarily to lower commodity prices, which negatively impacted the company's profitability, resulting in adjusted EBITDA of $96 million that fell short of consensus estimates. Additionally, the company's lowered EPS guidance, now projected at $1.80-1.95 from a prior range of $1.75-2.05, reflects ongoing operational challenges and declining earnings growth that have persisted for years. Furthermore, revenue and EBITDA results for Q3 were significantly below consensus, indicating continued execution risk as new management struggles to meet investor expectations amidst a challenging operational environment.

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