STERIS plc ( STE Quick Quote STE - Free Report) recently entered into a definitive agreement to purchase surgical instrumentation assets from Becton, Dickinson and Company ( BDX Quick Quote BDX - Free Report) . The transaction includes V. Mueller, Snowden-Pencer and Genesis branded products, which are the well-known providers of surgical instruments and sterilization containers to healthcare customers.
The $540 million transaction will be financed through a combination of debt and cash in hand. It is expected to close by the end of September 2023, subject to pending customary closing conditions and regulatory approval.
News in Detail
Under the terms of the agreement, STERIS will purchase surgical instrumentation, laparoscopic instrumentation and sterilization container assets from BDX at closing. Further, the acquisition serves as a natural extension for STERIS in the operating room and sterile processing department.
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Collectively, these businesses project annual revenues of $170 million (with adjusted earnings before interest and taxes of nearly $45 million) for BDX’s fiscal year ending Sep 30, 2023.
STERIS anticipates that the acquisition will qualify for a tax benefit related to tax-deductible goodwill, with a present value of approximately $60 million. Post the completion of the transaction, an updated fiscal year 2024 outlook will be issued by the company’s management.
The addition of the brands is expected to strengthen, complement and expand STERIS’ product offerings within the Healthcare segment.
Industry Prospects Per a Research report, the global surgical instrument market size was valued at $18.98 billion in 2021 and is expected to witness a CAGR of 8% by 2030. Recent Highlights
In the last reported fiscal fourth quarter, STERIS beat earnings and revenue estimates. At constant currency, organic revenues increased 16%, driven by the favorable volume and price. On a segmental basis, Healthcare revenues witnessed a 31% improvement in capital equipment revenues, a 15% increase in consumable revenues and a 15% rise in service revenues.
Revenues at AST (Applied Sterilization Technologies) were favored by the increased demand from core medical device customers despite a reduction in the demand for single-use bioprocessing customers. Amid the ongoing rebound of healthcare procedures, the strong underlying demand from core customers in MedTech for the company’s products is encouraging.
In addition, STERIS achieved approximately $10 million of cost synergies from the integration of Cantel Medical, bringing the full-year total to just more than $55 million. Heading into fiscal 2024, the company remains optimistic about the easing of supply-chain issues.
In the past six months, STERIS has outperformed the industry. Shares of the company have rallied 17% compared with the
industry’s rise of 9.1%. Zacks Rank and Key Picks
STERIS currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the overall healthcare sector are
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PEN’s earnings beat the consensus mark in each of the trailing four quarters, the average surprise being 109.42%. In the last reported quarter, the company registered an earnings surprise of 109.09%.
The Zacks Consensus Estimate for Lantheus’ 2023 EPS has remained constant at $5.60 in the past 30 days. Shares of the company have rallied 50.4% in the past year against the industry’s 20.7% decline.
LNTH’s earnings beat estimates in each of the trailing four quarters, the average surprise being 25.77%. In the last reported quarter, the company recorded an earnings surprise of 13.95%.