It’s been a sad week for Stericycle, Inc. (NASDAQ:SRCL), who’ve watched their investment drop 12% to US$57.45 in the week since the company reported its yearly result. It looks like the results were pretty good overall. While revenues of US$3.3b were in line with analyst predictions, statutory losses were much smaller than expected, with Stericycle losing US$3.81 per share. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see analysts’ latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, Stericycle’s eleven analysts currently expect revenues in 2020 to be US$3.26b, approximately in line with the last 12 months. Earnings are expected to improve, with Stericycle forecast to report a statutory profit of US$1.03 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$3.31b and earnings per share (EPS) of US$1.40 in 2020. So there’s definitely been a decline in analyst sentiment after the latest results, noting the large cut to new EPS forecasts.
The consensus price target held steady at US$69.56, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Stericycle at US$80.00 per share, while the most bearish prices it at US$52.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Stericycle’s past performance and to peers in the same market. We would highlight that sales are expected to reverse, with the forecast 1.3% revenue decline a notable change from historical growth of 4.6% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 5.2% annually for the foreseeable future. It’s pretty clear that Stericycle’s revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$69.56, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have estimates – from multiple Stericycle analysts – going out to 2024, and you can see them free on our platform here.
It might also be worth considering whether Stericycle’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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