On Sep 29, Zacks Investment Research updated the research report on waste management firm Stericycle, Inc. SRCL.
A significant portion of Stericycle’s historical growth is attributable to the successful integration of acquisitions in both domestic and international markets. The company is continuously on the lookout for strategic acquisitions that will grow market share and expand its geographic base. The acquisition pool of the company remains robust in multiple geographies and lines of business. International growth rates are expected to accelerate due to increasing customer adoption of multiple services and expansion into new lines of business.
The global acquisition strategy increases Stericycle’s customer base, by providing a long-term growth platform for selling multiple services. Whether the customer is a large hospital system or a retail chain, Stericycle provides multiple services to help them improve their operations and achieve their goals. As customers adopt these multiple services, they can almost triple their revenues in the long run.
Stericycle has recently inked a definitive agreement with business services provider Cintas Corporation CTAS and its other partners to acquire information destruction services provider Shred-it International for $2.3 billion in cash. With Shred-it on board, Stericycle is expected to enhance its core compliance solutions portfolio and offer specialized services, thereby augmenting its value proposition to clients. The transaction is anticipated to result in cost synergies to the tune of $20–$30 million by 2018, leading to accretive earnings. Earnings per share is expected to increase by at least 10% in 2016 and by the high-teens in 2018, generating robust cash flow and over $1 billion in EBITDA in 2016 through improved margins and debt repayment.
The transaction is likely to be completed in the fourth quarter of 2015, subject to the fulfilment of customary closing conditions and regulatory approvals. Post-acquisition, Shred-it will operate as a wholly-owned subsidiary of Stericycle. We believe that the current acquisition will serve this Zacks Rank #4 (Sell) stock in good stead, expand its global client base and generate incremental revenues.
A couple of stocks in the broader Industrial Goods sector that are worth a look include Graham Corporation GHM and Graco Inc. GGG, both carrying a Zacks Rank #2 (Buy).
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