It has been about a month since the last earnings report for Steris (STE Quick QuoteSTE - Free Report) . Shares have added about 1.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Steris due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

STERIS Q1 Earnings Top Estimates, Gross Margin Dips

STERIS plc reported first-quarter fiscal 2024 adjusted earnings per share of $2.00, up 5.3% from the year-ago quarter’s figure. The metric also exceeded the Zacks Consensus Estimate by 7.5%.

The adjustment excludes the impacts of certain non-recurring charges like the amortization of acquired intangible assets and acquisition and integration-related charges among others. The company’s GAAP earnings per share was $1.25, up 13.6% from the year-ago quarter’s earnings.

Revenues in Detail

Revenues of $1.28 billion increased 11% year over year in the first quarter. The metric beat the Zacks Consensus Estimate by 7.8%. Organic revenues at constant exchange rate or CER too rose 11% year over year in the fiscal first quarter.

Quarter in Detail

The company operates through four segments — Healthcare, Applied Sterilization Technologies (AST), Life Sciences and Dental.

Revenues at Healthcare rose 17% year over year to $818.9 million (up 18% on a CER organic basis). This performance reflected a 33% improvement in capital equipment revenues, a 12% increase in service revenues and an 11% rise in consumable revenues. Going by our model, the the projection for the Healthcare segment’s second-quarter organic growth was 5.8%.

Revenues at AST improved 6% to $233.1 million (up 5% on a CER organic basis). Revenue growth was limited by customer inventory management and the continued reduction in demand from bioprocessing customers. Our model estimated organic growth of 1.6% for this business in the second quarter.

Revenues in the Life Sciences segment dropped 1% to $131.4 million (down 1% year over year on a CER organic basis). A 4% increase in consumable revenues and a 20% increase in service revenues were offset by a 23% decline in capital equipment revenues in the reported quarter.

The Dental segment reported revenues of $101.2 million, down 3.4% year over year (down 4% on a CER organic basis).

Margins

Gross profit in the reported quarter was $573.5 million, up 10.7% from the prior-year quarter’s gross profit. Gross margin however contracted 13 basis points (bps) year over year to 44.6% in the reported quarter.

STERIS witnessed a 7.3% year-over-year rise in selling, general and administrative expenses to $359.1 million. Research and development expenses rose 3% to $25.5 million. Adjusted operating expenses of $384.6 million rose 7% year over year. The adjusted operating margin expanded 101 bps to 14.7%.

Financial Details

STERIS exited first-quarter fiscal 2024 with cash and cash equivalents of $208.6 million compared with $208.4 million at the end of the fiscal 2023 fourth quarter. Cumulative net cash flow from operating activities at the end of fiscal first quarter was $281.1 million compared with $231.7 million a year ago.

Further, the company has a five-year annualized dividend growth rate of 7.98%.

Guidance

Considering the just-completed acquisition of the surgical instrumentation, laparoscopic instrumentation and sterilization container assets from Becton, Dickinson and Company or BD (BDX), STERIS updated its fiscal 2024 guidance.

STERIS now expects fiscal 2024 revenues to increase 9-10% from fiscal 2023 (earlier expectation was in the range of 7-8% growth). Organic revenue expectation at CER remains unchanged at 6-7%. The Zacks Consensus Estimate for fiscal 2024 revenues is pegged at $5.33 billion, implying 7.5% growth from fiscal 2023.

Adjusted earnings per share for fiscal 2024 are now expected in the range of $8.60 to $8.80 (earlier range was $8.55 to $8.75). The Zacks Consensus Estimate for the metric is pegged at $8.79.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, Steris has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Steris has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Steris belongs to the Zacks Medical - Instruments industry. Another stock from the same industry, Thermo Fisher Scientific (TMO Quick QuoteTMO - Free Report) , has gained 1% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.

Thermo Fisher reported revenues of $10.69 billion in the last reported quarter, representing a year-over-year change of -2.6%. EPS of $5.15 for the same period compares with $5.51 a year ago.

For the current quarter, Thermo Fisher is expected to post earnings of $5.39 per share, indicating a change of +6.1% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.3% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Thermo Fisher. Also, the stock has a VGM Score of D.