It has been about a month since the last earnings report for Steris (STE Quick QuoteSTE - Free Report) . Shares have added about 0.9% in that time frame, underperforming 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.

STE Q2 Earnings Beat Estimates, Margins Dip

STERIS plc reported second-quarter fiscal 2025 adjusted earnings per share (EPS) of $2.14, up 15.1% from the year-ago quarter’s figure. The figure surpassed the Zacks Consensus Estimate by 1.4%.

The adjustment excludes the impacts of certain non-recurring charges, such as the amortization of acquired intangible assets and acquisition and integration-related charges, among others.

The company’s GAAP EPS was $1.51, up 25.8% from the year-ago level of $1.20.  

Q2 Revenues in Details

Revenues of $1.33 billion from continuing operations increased 7.3% year over year. The figure missed the Zacks Consensus Estimate by 0.6%.

Organic revenues at constant exchange rate or CER rose 7% year over year.

Quarterly Performance in Details

The company operates through three segments — Healthcare, Applied Sterilization Technologies (“AST”) and Life Sciences.

Revenues at Healthcare rose 9% year over year to $944.2 million (up 7% on a CER organic basis). While there was a 12% improvement in consumable revenues and a 14% increase in service revenues, these were partially offset by a 2% decline in capital equipment revenues.  

Revenues at AST improved 9% to $256.7 million (up 9% on a CER organic basis). This performance indicated 6% growth in service revenues and a significant increase in capital equipment revenues. 

Revenues in the Life Sciences segment decreased 4% to $127.9 million (up 3% year over year on a CER organic basis). The decline in revenues was due to the divestiture of the CECS business. This performance implied 21% growth in consumable revenues, offset by a 35% decline in capital equipment revenues and a 14% drop in service revenues. 

Margins

The gross profit in the reported quarter was $578.8 million, up 6.0% from the prior-year level. The gross margin contracted 56 basis points (bps) year over year to 43.6% due to an 8.4% increase in the cost of revenues.

STERIS witnessed a 0.3% year-over-year rise in selling, general and administrative expenses. The figure amounted to $329.3 million. Research and development expenses rose 2.9% to $27.0 million. Adjusted operating expenses of $356.3 million increased 0.5% year over year. The adjusted operating margin expanded 127 bps to 16.7%.

Financial Details

STERIS exited the second quarter of fiscal 2025 with cash and cash equivalents of $172.2 million compared with $198.3 million at the end of the fiscal first quarter.

Cumulative net cash flow from operating activities at the end of the fiscal second quarter was $554.5 million compared with $427.2 million in the year-ago period. Further, the company has a five-year annualized dividend growth rate of 8.44%.

Guidance

STERIS reiterated its fiscal 2025 projection.

The company expects revenues to increase 6.5-7.5%. Constant currency organic revenues are expected to increase 6-7% (earlier 5-7%).

The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $5.48 billion, implying 0.6% growth from fiscal 2024.

Adjusted EPS is expected to be in the range of $9.05-$9.25. The Zacks Consensus Estimate for the metric is pegged at $9.02.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Steris has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. 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 is part of the Zacks Medical - Instruments industry. Over the past month, Masimo (MASI Quick QuoteMASI - Free Report) , a stock from the same industry, has gained 5%. The company reported its results for the quarter ended September 2024 more than a month ago.

Masimo reported revenues of $504.6 million in the last reported quarter, representing a year-over-year change of +5.4%. EPS of $0.98 for the same period compares with $0.63 a year ago.

For the current quarter, Masimo is expected to post earnings of $1.42 per share, indicating a change of +13.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.1% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Masimo. Also, the stock has a VGM Score of F.