Imperial Capital Cuts Price Target on Stericycle (SRCL) to $80; Reiterates Underperform
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Imperial Capital maintained an Underperform rating on Stericycle (NASDAQ: SRCL), and cut the price target to $80.00 (from $93.50), as headwinds persist. Despite the adjustments, Imperial expects SRCL to remain a leading global provider of medical waste and related services, and awaits a reacceleration in earnings growth and-or improvement in visibility, before becoming more positive.
Analyst Scott Levine commented, "Over the past 4-6 quarters, SRCL has experienced headwinds in several of its businesses, including domestic medical waste (pricing), international medical waste (U.K. patient transport, LatAm cost recovery), hazardous waste (industrial slowdown), and Shred-it (synergy delays). Although visibility is limited regarding the potential pace of stabilization and/or recovery, we think the pressure will likely linger in the near term (particularly in core med waste), and we are reducing our EPS estimates, primarily to reflect a more gradual recovery in margins (we now assume 60bp of EBITDA margin expansion in FY17, and 120bp in FY18). Our FY16 EPS estimate falls to $4.65 from $4.68 (slightly below guidance of $4.68-4.75), our FY17 estimate falls to $5.00 from $5.26, and FY18 EPS falls to $5.65 from $6.00. We think SRCL will likely provide initial FY17 guidance on its 3Q16 earnings call."
Shares of Stericycle closed at $82.64 yesterday.
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