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STERIS (STE) Hits a New 52-Week High: What's Driving It?

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STERIS plc (STE - Free Report) reached a new 52-week high of $208.65 on Apr 16, before closing the session marginally lower at $208.14. The stock has gained 8.9% since its third-quarter earnings announcement on Feb 2.

The company is witnessing an upward trend in its stock price, prompted by the Key Surgical buyout, elevated consumer demand and rebound in procedure volumes. Further, solid performance by each of its key operating businesses in the third quarter of fiscal 2021 boosted market sentiments. However, pricing pressure and stiff competition remain a concern.    

Let’s delve deeper.

Key Growth Catalysts

Solid Q3 Performance:  STERIS exited third-quarter fiscal 2021 with better-than-expected results. The company witnessed solid revenue growth across all three of its reporting segments despite the coronavirus pandemic. Contributions from the Key Surgical buyout, elevated consumer demand and rebound in procedure volumes along with strength in segments catering to COVID-related products and services are encouraging. STERIS’ Life Sciences segment saw 7% growth in consumable revenues and 5% rise in service revenues in the reported quarter. An increase in free cash flow despite increased capital spending instills optimism. An overall strong solvency position instills optimism as well.

Growth in STERIS’ Infection Prevention and Sterilization Wing: Investors are upbeat about STERIS’ acquisition of U.K.-based outsourced sterilization services provider Synergy Health – which positions STERIS as a global leader in infection prevention and sterilization. The company continues to benefit from the takeover of Synergy Health. The consolidation boosted STERIS' presence in international markets as it combines the company’s strong presence in North America with Synergy's solid footprint across Europe.

Potential in Healthcare and Pharmaceutical Industries: Investors are optimistic about the growth potential of the company in the healthcare and pharmaceutical industries. With life expectancy on the rise globally, a larger aging population boosts demand for medical procedures. This, in turn, translates into higher consumption of single-use medical devices and surgical kits processed by STERIS.

During its fiscal third-quarter earnings call, STERIS confirmed that it expects to register sustained high demand for its consumables offering in the Life Sciences business on the back of production of COVID-19 vaccines.

Downsides

On the flip side, there are some factors that have been deterring the stock’s rally of late.

Macroeconomic Conditions: The current macroeconomic environment across the globe has affected STERIS’ financial operations. Governments and insurance companies continue to look for ways to contain the rising cost of healthcare. This might build pressure on players in the healthcare industry, with STERIS being no exception.

Competitive Landscape: STERIS competes for pharmaceutical, research and industrial customers against several large companies as well as a number of small companies with limited product offerings and operations in one or a few countries. In the Healthcare segment, STERIS’ notable competitors include 3M, Belimed, Cantel Medical, Ecolab, Getinge, Go Jo, Johnson & Johnson, Kimberly-Clark, Skytron and Stryker.

Zacks Rank and Other Key Picks

Currently, STERIS carries a Zacks Rank #2 (Buy).

Other similar-ranked stocks from the broader medical space include Intuitive Surgical, Inc. (ISRG - Free Report) , Cantel Medical Corp. and ConforMIS, Inc. . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical has a projected long-term earnings growth rate of 21%.

Cantel Medical has an estimated long-term earnings growth rate of 19%.

ConforMIS has a projected long-term earnings growth rate of 42%.

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STERIS plc (STE) - free report >>

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