Stericycle: Waste Not, Want Not

Stericycle, Inc. (SRCL) provides regulated medical waste management and return management services in the United States, the United Kingdom, Mexico, Canada, Ireland, Argentina, and the Puerto Rico. It offers institutional regulated waste management services, Bio Systems sharps management services to reduce the risk of needle sticks, various products and services for infection control, and regulated returns management services for expired or recalled healthcare products.

Its first-quarter results gave the bulls something to smile about as it reported 39 cents versus the 38-cent consensus. Revenue rose 21% to $254.8 million from $211 million. William Blair Analyst Ryan shares similar feelings about the company as we do:

The consistency of the company’s business model creates an impressive and durable business franchise, and we believe these results again highlight the consistency of the Stericycle model (an important investment merit given the current uncertainty in the U.S. economy),” Daniels said in a note to clients.

That consistency will appeal to a wide range of shareholders, especially in tough economic times. It has averaged a 5.7% surprise over the past four quarters with no misses. This year’s earnings estimates have ticked higher by two cents to $1.70 per share over the past two months. Analysts are forecasting earnings to jump a further 16.6% next year. We see the shares hitting $67 in the next year.

Suggested Option Trade:

Based on our analysis of SCRL’s chart, aggressive investors might want to consider the SCRL July 60 call options. SCRL’s share price is breaking out and the next level of resistance is around $60. A close above $60 and the stock should challenge it 52 week high of $62.65.

At $60 by mid-June, investor’s can expect to make about 27% on their money. A return to Stericycle’s year high and the July Call could more than double from Tuesday’s last trade of $1.80.

Suggested Stop: $53.84

Disclosure: None