What's in Store for Stericycle (SRCL) this Earnings?

Waste management firm Stericycle, Inc. SRCL is scheduled to report its fourth-quarter 2015 results after the closing bell on Feb 4. In the last reported quarter, adjusted earnings were well below the Zacks Consensus Estimate by 10 cents. The company has a dismal earnings history with a trailing four-quarter average negative earnings surprise of 2.6%. It missed estimates twice and barely matched the same in the remaining two quarters. Let's see how things are shaping up for this announcement.

Key Factors in the Fourth Quarter
 
High operating costs continue to be a headwind for Stericycle. In addition, a challenging macroeconomic environment and volatility in foreign exchange continue to contract margins and strain the bottom line.

Furthermore, Stericycle largely depends on inorganic growth to fuel its growth engine and improve revenues. Most of these acquisitions have lower gross margins and higher selling, general and administrative expenses. To add to the woes, the recent spate of acquisitions is leading to higher overheads and integration-related expenses and is likely to result in lower profits.

Stericycle operates in a highly-competitive market. The barriers to entry into the regulated waste collection and disposal business and the pharmaceutical returns business are very low. Competitors also resort to aggressive pricing to gain market share. This erodes the profitability of the company and is likely to lead to lower earnings in the soon-to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Stericycle is likely to beat earnings this quarter as it lacks the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently -0.92%.

Zacks Rank: Stericycle's Zacks Rank #4 (Sell) when combined with negative ESP makes an earnings beat prediction uncertain. In addition, the Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

American Capital, Ltd. ACAS, earnings ESP of +12.50% and a Zacks Rank #1.

Gilead Sciences Inc. GILD, earnings ESP of +2.75% and a Zacks Rank #1.

ServiceMaster Global Holdings, Inc. SERV, earnings ESP of +3.23% and a Zacks Rank #2.

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