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Should You Continue to Retain STERIS Stock in Your Portfolio Now?
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STERIS plc’s (STE - Free Report) continues to thrive, fueled by strong procedure volume growth, favorable pricing and market share gains. The company is seeing early signs of increased bioprocessing demand, which is poised to support the AST (Applied Sterilization Technologies) segment’s growth in the upcoming quarters. A sound financial health also bodes well for the stock. Meanwhile, the impacts of macroeconomic challenges and adverse currency exchange raise concerns for STERIS’ operational results.
In the past year, shares of this Zacks Rank #3 (Hold) company have declined 2.5% compared with the industry’s 2.5% fall. The S&P 500 Composite has risen 9.5% in the same time frame.
The renowned provider of infection prevention and other procedural products and services has a market capitalization of $22.75 billion. The company has an earnings yield of 3.93% compared to the industry’s -3.15%. In the trailing four quarters, STE delivered an average earnings surprise of 0.61%.
Let’s delve deeper.
STERIS’ Tailwinds
Promising Healthcare Business: The Healthcare segment is gaining from the successful market adoption of its comprehensive offerings, including infection prevention consumables and capital equipment. Over the past few quarters, the segment’s organic growth has been driven by continuous procedure volume growth in the United States, favorable pricing and market share gains. For the fiscal third quarter, Healthcare reported revenue growth of 7% year over year, supported by a 9% improvement in consumable revenues and 13% growth in service revenues, with both segments posting strong organic revenue growth. The company’s outperformance in consumables and services continues to be driven by procedure volumes in the United States as well as price and market share gains.
Image Source: Zacks Investment Research
Strong Rebound Prospects in the AST Segment: This technology-neutral contract sterilization service successfully offers a wide range of sterilization modalities through a worldwide network of more than 50 contract sterilization and laboratory facilities. STERIS is particularly gaining success with ethylene oxide (EO) sterilization. In the fiscal third quarter, the AST division experienced 10% reported growth year over year. This performance was driven by a 10% increase in service revenues. Constant currency organic revenues were in the low double digits. STERIS experienced its first signs of increased bioprocessing demand. Meanwhile, global demand from MedTech customers was stable. The company expects bioprocessing revenues to grow in the upcoming quarters.
Favorable Solvency: As of the fiscal third quarter, STERIS had a long-term debt of $2.04 billion, down 5.6% from $2.16 billion recorded at the end of the fiscal second quarter. The company exited the fiscal third quarter with cash and cash equivalents of $155.2 million, higher than its short-term debt of $125 million. The total debt-to-capital ratio remained at 25.2%, in line with the previous quarter’s level.
Downsides for STE
Macroeconomic Problems: The current macroeconomic environment across the globe has adversely affected STERIS’ financial operations. With governments and insurance companies making efforts to curb the rising cost of healthcare, these have added strain on industry players, including STERIS. Rising costs and supply shortages of raw materials, oil and gas have also historically led to an increase in production costs. In addition, economic and market volatility have been affecting the investment portfolio of STERIS’ legacy defined benefit pension plan. We are concerned that lingering macroeconomic softness might hamper STERIS’ growth.
Foreign Currency Risks: STERIS is exposed to adverse currency fluctuations, with nearly 30% of its revenues and costs of revenues being generated outside the United States. Ongoing geopolitical instability, such as Russia’s invasion of Ukraine, has led to heightened foreign currency volatility. On the fiscal third-quarter earnings call, the company cited currency headwinds impacting both revenues and profit, prompting a revised revenue growth rate forecast to approximately 6% from 6.5-7.5%.
STE Estimate Revision Trend
In the past 30 days, the Zacks Consensus Estimate for STERIS’ fiscal 2025 earnings has increased 1 cent to $9.09.
The Zacks Consensus Estimate for the company’s fiscal 2025 revenues is pegged at $5.46 billion, a 0.3% increase from the fiscal 2024 reported number.
Veracyte has an estimated 2024 earnings growth rate of 37.2% compared with the industry’s 15.3%. Veracyte’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 520.6%. Its shares have risen 44.5% compared with the industry’s 3.6% growth in the past year.
Resmed, carrying a Zacks Rank #2 (Buy) at present, has an estimated fiscal 2025 earnings growth rate of 22.7% compared with the industry’s 18.8%. Shares of the company have increased 17.3% compared to the industry’s 7.7% growth. RMD’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 6.86%.
Boston Scientific, carrying a Zacks Rank #2 at present, has a long-term estimated earnings growth rate of 13.3%. Shares of the company have surged 54.4% compared with the industry’s 9.7% growth. BSX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 8.29%.
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Should You Continue to Retain STERIS Stock in Your Portfolio Now?
STERIS plc’s (STE - Free Report) continues to thrive, fueled by strong procedure volume growth, favorable pricing and market share gains. The company is seeing early signs of increased bioprocessing demand, which is poised to support the AST (Applied Sterilization Technologies) segment’s growth in the upcoming quarters. A sound financial health also bodes well for the stock. Meanwhile, the impacts of macroeconomic challenges and adverse currency exchange raise concerns for STERIS’ operational results.
In the past year, shares of this Zacks Rank #3 (Hold) company have declined 2.5% compared with the industry’s 2.5% fall. The S&P 500 Composite has risen 9.5% in the same time frame.
The renowned provider of infection prevention and other procedural products and services has a market capitalization of $22.75 billion. The company has an earnings yield of 3.93% compared to the industry’s -3.15%. In the trailing four quarters, STE delivered an average earnings surprise of 0.61%.
Let’s delve deeper.
STERIS’ Tailwinds
Promising Healthcare Business: The Healthcare segment is gaining from the successful market adoption of its comprehensive offerings, including infection prevention consumables and capital equipment. Over the past few quarters, the segment’s organic growth has been driven by continuous procedure volume growth in the United States, favorable pricing and market share gains. For the fiscal third quarter, Healthcare reported revenue growth of 7% year over year, supported by a 9% improvement in consumable revenues and 13% growth in service revenues, with both segments posting strong organic revenue growth. The company’s outperformance in consumables and services continues to be driven by procedure volumes in the United States as well as price and market share gains.
Image Source: Zacks Investment Research
Strong Rebound Prospects in the AST Segment: This technology-neutral contract sterilization service successfully offers a wide range of sterilization modalities through a worldwide network of more than 50 contract sterilization and laboratory facilities. STERIS is particularly gaining success with ethylene oxide (EO) sterilization. In the fiscal third quarter, the AST division experienced 10% reported growth year over year. This performance was driven by a 10% increase in service revenues. Constant currency organic revenues were in the low double digits. STERIS experienced its first signs of increased bioprocessing demand. Meanwhile, global demand from MedTech customers was stable. The company expects bioprocessing revenues to grow in the upcoming quarters.
Favorable Solvency: As of the fiscal third quarter, STERIS had a long-term debt of $2.04 billion, down 5.6% from $2.16 billion recorded at the end of the fiscal second quarter. The company exited the fiscal third quarter with cash and cash equivalents of $155.2 million, higher than its short-term debt of $125 million. The total debt-to-capital ratio remained at 25.2%, in line with the previous quarter’s level.
Downsides for STE
Macroeconomic Problems: The current macroeconomic environment across the globe has adversely affected STERIS’ financial operations. With governments and insurance companies making efforts to curb the rising cost of healthcare, these have added strain on industry players, including STERIS. Rising costs and supply shortages of raw materials, oil and gas have also historically led to an increase in production costs. In addition, economic and market volatility have been affecting the investment portfolio of STERIS’ legacy defined benefit pension plan. We are concerned that lingering macroeconomic softness might hamper STERIS’ growth.
Foreign Currency Risks: STERIS is exposed to adverse currency fluctuations, with nearly 30% of its revenues and costs of revenues being generated outside the United States. Ongoing geopolitical instability, such as Russia’s invasion of Ukraine, has led to heightened foreign currency volatility. On the fiscal third-quarter earnings call, the company cited currency headwinds impacting both revenues and profit, prompting a revised revenue growth rate forecast to approximately 6% from 6.5-7.5%.
STE Estimate Revision Trend
In the past 30 days, the Zacks Consensus Estimate for STERIS’ fiscal 2025 earnings has increased 1 cent to $9.09.
The Zacks Consensus Estimate for the company’s fiscal 2025 revenues is pegged at $5.46 billion, a 0.3% increase from the fiscal 2024 reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Veracyte (VCYT - Free Report) , Resmed (RMD - Free Report) and Boston Scientific (BSX - Free Report) .
Veracyte has an estimated 2024 earnings growth rate of 37.2% compared with the industry’s 15.3%. Veracyte’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 520.6%. Its shares have risen 44.5% compared with the industry’s 3.6% growth in the past year.
VCYT sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Resmed, carrying a Zacks Rank #2 (Buy) at present, has an estimated fiscal 2025 earnings growth rate of 22.7% compared with the industry’s 18.8%. Shares of the company have increased 17.3% compared to the industry’s 7.7% growth. RMD’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 6.86%.
Boston Scientific, carrying a Zacks Rank #2 at present, has a long-term estimated earnings growth rate of 13.3%. Shares of the company have surged 54.4% compared with the industry’s 9.7% growth. BSX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 8.29%.