SRCL - Stericycle: Future Profitability Influenced By Divestments And ERP Implementation

• Stericycle's top line and bottom line declined in 3Q 2020 as the company's Secure Information Destruction Services business saw a -16.8% YoY decline in segment revenue due to pandemic headwinds.
• Portfolio optimization, more specifically divestments, is a key re-rating catalyst for Stericycle, as the disposal of low-margin or loss-making non-core businesses helps to enhance the company's future profitability.
• On the flip side, ERP implementation will be a drag on Stericycle's earnings in 2021 and beyond, which is a 'side-effect' of the company's hundreds of acquisitions in the past.
• Stericycle trades at consensus forward FY 2020 and FY 2021 P/E of 28.9 times and 26.1 times, respectively.

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