Waste management service provider Stericycle Inc. (SRCL) earned 55 cents in the third quarter, beating the Zacks Consensus Estimate by 2 cents. Earnings were up about 24% year-over-year, while it improved 9% sequentially on higher revenues and margins.

Revenues showed an increase of 7.5% year over year to $46.5 million helped by recent acquisitions, which added $19.3 million in the quarter. Stericycle completed six acquisitions during the first nine months of this year, which included the recently acquired Healthcare Waste Solutions’ operations in Minnesota and Wisconsin, besides Omni Medical Waste in Grand Rapids, Michigan.

Operating costs decreased to 52.7% of total sales in the quarter from 55.6% in the same period of the previous year following which gross profit expanded to $140.9 million from $123.0 million in the same quarter last year. As a percent of revenue, gross profit improved to 47.3% from 44.4% in the year-ago quarter. However, selling and administrative expenses increased to 18.9% of total sales in the quarter from 18.1% last year.

At quarter end, Stericycle’s cash and cash equivalent was $14.3 billion. With total debt of $768,041, Stericycle‘s debt to capital ratio improved to 40% in the quarter from 49% in the previous quarter. The company’s net cash position (long-term debt including current portion less cash) is a surplus of $812 million or $9.35 per share, which is a huge positive associated with the stock.

Stericycle is currently the largest waste management company in Canada, Mexico , Ireland and the UK , and is gaining scale in Argentina. The company entered the Canadian, Irish and UK markets through the purchase of large local competitors and developed an initial footprint in Mexico and Argentina through joint ventures.

The competitive dynamics in these markets are similar to the U.S. as the company is typically competing against many small regional entities as opposed to a handful of large companies. American Ecology Corp. (ECOL) and Waste Management Inc. (WMI) are Stericycle’s major competitors.

Zacks Investment Research
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