STERIS plc’s (STE Quick QuoteSTE - Free Report) Healthcare segment is gaining from the successful market adoption of its comprehensive offerings, including infection prevention consumables and capital equipment. Service revenues are driving growth in the company’s Applied Sterilization Technologies (“AST”) segment. Sound financial health is also encouraging. Meanwhile, macroeconomic volatilities and adverse currency fluctuations raise concerns for STERIS stock.

In the past year, shares of this Zacks Rank #3 (Hold) company have risen 4.8% against the industry’s 17.8% growth and the S&P 500 composite’s 18.4% rise.

The renowned provider of infection prevention, and other procedural products and services has a market capitalization of $21.75 billion. The company has an earnings yield of 4.20% compared to the industry’s -5.82%. In the trailing four quarters, STE delivered an average earnings surprise of 2.21%.

Let’s delve deeper.

STE: Factors at Play

Promising Healthcare Business: Over the past few quarters, the segment’s organic growth has been driven by the continuous procedure volume growth in the United States, and favorable pricing and market share gains. For the first quarter of fiscal 2026, Healthcare reported revenue growth of 8% year over year (up 8% on a CER organic basis). This outperformance indicated a 5% improvement in consumable revenues and a 6% increase in capital equipment revenues. Service revenues continued their streak of outperformance with a 13% year-over-year increase. Order growth was robust, with more than 14% growth in the fiscal first quarter. Margins improved, primarily driven by increasing volume, favorable pricing, positive productivity and restructuring program benefits offsetting tariffs and inflation.

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Strong Rebound Prospects in the AST Segment: This technology-neutral contract sterilization service offers a wide range of sterilization modalities through a worldwide network of over 50 contract sterilization and laboratory facilities. STERIS, particularly, is gaining success with ethylene oxide (EO) sterilization. STERIS’ customers in this business are mostly manufacturers of single-use, sterile technologies used in the aseptic manufacturing of vaccines and biopharmaceuticals. In the fiscal first quarter, the AST division experienced 13% growth year over year. This was driven by a 12% increase in service revenues. Constant currency organic revenues were in the low double digits. The growth can be attributed to currency, bioprocessing demand and stable medical device volumes.

Favorable Solvency: STERIS looks quite comfortable from the liquidity point of view. In the first quarter of fiscal 2026, STERIS had long-term debt of $1.90 billion, down 0.8% sequentially. The company exited the fiscal first quarter with cash and cash equivalents of $279.7 million, with no short-term debt reported. The total debt-to-capital ratio was 21.4% at the end of the quarter, down 2.2% year over year.

What Concerns STERIS?

Macroeconomic Problems: The current macroeconomic environment across the globe has adversely affected STERIS’ financial operations. Governments and insurance companies continue to look for ways to contain the rising cost of healthcare. This is significantly putting pressure on players in the healthcare industry, with STERIS being no exception. Increases in prices or decreases in the availability of raw materials, oil and gas have also historically impaired STERIS’ procurement of necessary materials for product manufacture, leading 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. Moreover, STERIS is facing increasing costs as a result of the implementation of tariffs by the new U.S. government.

Foreign Currency Risks: With nearly 30% of the company’s revenues and costs of revenues being generated outside the United States, foreign currency exchange rate fluctuations can significantly impact its financial position, results of operations and competitive position. For most operations, local currencies have been determined to be the functional currencies. For instance, the ongoing geopolitical instability, such as Russia’s invasion of Ukraine, has negatively impacted the global and U.S. economies, leading to supply-chain disruptions, rising interest rates, volatility in capital markets and foreign currency exchange rates, and heightened cybersecurity risks.

STE Stock Estimate Trend

In the past 30 days, the Zacks Consensus Estimate for STERIS’ fiscal 2026 earnings per share (EPS) indicates a 9.1% improvement at $10.06. 

The Zacks Consensus Estimate for fiscal 2026 revenues is pegged at $5.91 billion, which suggests 8.2% growth from the fiscal 2024 reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Masimo (MASI Quick QuoteMASI - Free Report) , Phibro Animal Health (PAHC Quick QuotePAHC - Free Report) and Cardinal Health (CAH Quick QuoteCAH - Free Report) .

Masimo has an earnings yield of 3.77% against the industry’s 4.4% fall. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 13.8%. MASI shares have rallied 18% against the industry’s 17.7% drop in the past year.

MASI carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Phibro Animal Health, carrying a Zacks Rank #2, has an earnings yield of 6.5% compared with the industry’s 0.5% growth. Shares of the company have surged 80.2% compared with the industry’s flat growth. PAHC’s earnings outpaced estimates in each of the trailing four quarters, with the average surprise being 27.9%.

Cardinal Health, carrying a Zacks Rank #2, has an estimated long-term earnings growth rate of 12.5% compared with the industry’s 9.7% growth. Shares of the company have rallied 36.1% against the industry’s 2.9% fall. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 9.2%.