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Reasons to Retain STE Stock in Your Portfolio for Now
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Key Takeaways
STE's Healthcare revenues rose 7% in Q4 to $1.14B as service, consumables and capital equipment grew.
STE's AST hit $1B revenues in fiscal 2026 as services rose 11% and operating profit topped $500M.
STE flags FX swings, ~$46M tariff costs and higher SG&A/R&D that helped drive a 61-bp adjusted margin drop.
STERIS plc’s (STE - Free Report) Healthcare segment continues to see strong market adoption of its comprehensive offerings, including infection prevention consumables and capital equipment. The Applied Sterilization Technologies (“AST”) segment is gaining from robust service revenues, which is encouraging. Macroeconomic volatilities and unfavorable foreign exchange raise concerns for the company.
Over the past year, this Zacks Rank #3 (Hold) company’s shares have lost 9.6% compared with the industry’s 4.2% decline. The S&P 500 composite has risen 32.5% over the period.
The renowned provider of infection prevention and other procedural products and services has a market capitalization of $21.18 billion. The company has an earnings yield of 5.1%, well above the industry’s negative 2.2% yield. STE delivered an average earnings surprise of 0.9% for the trailing four quarters.
Let’s delve deeper.
Positive Factors for STERIS
Promising Healthcare Business: The Healthcare segment is gaining from the successful market adoption of its comprehensive offerings, including infection prevention consumables and capital equipment. Further, its services to maintain that equipment, repair reusable procedural instruments and outsource instrument reprocessing services are gaining traction.
In the fiscal fourth quarter, Healthcare revenues increased 7% to $1.14 billion, with service up 9%, consumables up 7% and capital equipment up 6%. Constant currency organic growth was 6% during the quarter.
For the full year, Healthcare revenues rose to $4.21 billion and service grew 12%, while capital equipment increased 6%. Capital equipment backlog ended just under $400 million, with orders up 2% in the fiscal fourth quarter.
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 over 50 contract sterilization and laboratory facilities. STERIS is gaining success with ethylene oxide (EO) sterilization. STERIS’ customers in this business are mostly the manufacturers of single-use, sterile technologies that are used in aseptic manufacturing of vaccines and biopharmaceuticals.
For fiscal 2026, AST revenues increased 10% with services up 11% as reported, aligning with the company’s longer-term expectations. With more than $1 billion in revenues, AST reached a new milestone by surpassing $500 million in operating profit.
Fourth-quarter AST revenues increased 6% year over year to $289.2 million, driven by 10% growth in services revenue, while capital equipment revenues declined 62%. Constant-currency organic growth for the quarter was 2%.
Image Source: Zacks Investment Research
Negative Factors for STERIS
Foreign Currency Risks: With a meaningful portion of revenues and costs generated outside the United States, foreign exchange volatility can impact reported results and competitiveness. Although the company expects slightly favorable foreign exchange impact, the broader market volatility may add to supply-chain disruption, market volatility and currency swings, increasing earnings variability.
Macroeconomic Problems: Global macro pressure and healthcare cost-containment efforts continue to weigh on spending and pricing. STERIS is facing increasing costs because of the implementation of tariffs by the new U.S. government. In 2026, incremental tariff costs were approximately $46 million, which trimmed margin by 80 basis points.
These macroeconomic factors are also resulting in a significant escalation in the company’s operating expenses. Selling, general and administrative expenses increased 5.4%, while research and development expenses rose 4%. This led to adjusted operating margin contraction of 61 bps.
STE Stock Estimate Trend
The Zacks Consensus Estimate for fiscal 2027 earnings per share (EPS) indicates a 0.4% increase to $11.09.
The consensus mark for fiscal 2027 revenues is pegged at $6.37 billion, which suggests 7.4% growth from the fiscal 2026 reported number.
Globus Medical has an earnings yield of 6.1% compared to the industry’s negative 1.1% yield. Its earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 26.3%. GMED shares have rallied 28.1% against the industry’s 12.5% decline over the past year.
Alcon, carrying a Zacks Rank #2 (Buy), has an earnings yield of 5.2% against the industry’s negative 2.2% yield. Shares of the company have risen 6.6% compared with the industry’s 0.5% growth. ALC’s earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 3.7%.
Phibro Animal Health, carrying a Zacks Rank #2, has an estimated long-term earnings growth rate of 21.5% compared with the industry’s 12.1%. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 16.3%. PAHC’s shares have rallied 41.8% against the industry’s 32.8% decline over the past year.
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Reasons to Retain STE Stock in Your Portfolio for Now
Key Takeaways
STERIS plc’s (STE - Free Report) Healthcare segment continues to see strong market adoption of its comprehensive offerings, including infection prevention consumables and capital equipment. The Applied Sterilization Technologies (“AST”) segment is gaining from robust service revenues, which is encouraging. Macroeconomic volatilities and unfavorable foreign exchange raise concerns for the company.
Over the past year, this Zacks Rank #3 (Hold) company’s shares have lost 9.6% compared with the industry’s 4.2% decline. The S&P 500 composite has risen 32.5% over the period.
The renowned provider of infection prevention and other procedural products and services has a market capitalization of $21.18 billion. The company has an earnings yield of 5.1%, well above the industry’s negative 2.2% yield. STE delivered an average earnings surprise of 0.9% for the trailing four quarters.
Let’s delve deeper.
Positive Factors for STERIS
Promising Healthcare Business: The Healthcare segment is gaining from the successful market adoption of its comprehensive offerings, including infection prevention consumables and capital equipment. Further, its services to maintain that equipment, repair reusable procedural instruments and outsource instrument reprocessing services are gaining traction.
In the fiscal fourth quarter, Healthcare revenues increased 7% to $1.14 billion, with service up 9%, consumables up 7% and capital equipment up 6%. Constant currency organic growth was 6% during the quarter.
For the full year, Healthcare revenues rose to $4.21 billion and service grew 12%, while capital equipment increased 6%. Capital equipment backlog ended just under $400 million, with orders up 2% in the fiscal fourth quarter.
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 over 50 contract sterilization and laboratory facilities. STERIS is gaining success with ethylene oxide (EO) sterilization. STERIS’ customers in this business are mostly the manufacturers of single-use, sterile technologies that are used in aseptic manufacturing of vaccines and biopharmaceuticals.
For fiscal 2026, AST revenues increased 10% with services up 11% as reported, aligning with the company’s longer-term expectations. With more than $1 billion in revenues, AST reached a new milestone by surpassing $500 million in operating profit.
Fourth-quarter AST revenues increased 6% year over year to $289.2 million, driven by 10% growth in services revenue, while capital equipment revenues declined 62%. Constant-currency organic growth for the quarter was 2%.
Image Source: Zacks Investment Research
Negative Factors for STERIS
Foreign Currency Risks: With a meaningful portion of revenues and costs generated outside the United States, foreign exchange volatility can impact reported results and competitiveness. Although the company expects slightly favorable foreign exchange impact, the broader market volatility may add to supply-chain disruption, market volatility and currency swings, increasing earnings variability.
Macroeconomic Problems: Global macro pressure and healthcare cost-containment efforts continue to weigh on spending and pricing. STERIS is facing increasing costs because of the implementation of tariffs by the new U.S. government. In 2026, incremental tariff costs were approximately $46 million, which trimmed margin by 80 basis points.
These macroeconomic factors are also resulting in a significant escalation in the company’s operating expenses. Selling, general and administrative expenses increased 5.4%, while research and development expenses rose 4%. This led to adjusted operating margin contraction of 61 bps.
STE Stock Estimate Trend
The Zacks Consensus Estimate for fiscal 2027 earnings per share (EPS) indicates a 0.4% increase to $11.09.
The consensus mark for fiscal 2027 revenues is pegged at $6.37 billion, which suggests 7.4% growth from the fiscal 2026 reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Globus Medical (GMED - Free Report) , Alcon (ALC - Free Report) and Phibro Animal Health (PAHC - Free Report) .
Globus Medical has an earnings yield of 6.1% compared to the industry’s negative 1.1% yield. Its earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 26.3%. GMED shares have rallied 28.1% against the industry’s 12.5% decline over the past year.
GMED sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Alcon, carrying a Zacks Rank #2 (Buy), has an earnings yield of 5.2% against the industry’s negative 2.2% yield. Shares of the company have risen 6.6% compared with the industry’s 0.5% growth. ALC’s earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 3.7%.
Phibro Animal Health, carrying a Zacks Rank #2, has an estimated long-term earnings growth rate of 21.5% compared with the industry’s 12.1%. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 16.3%. PAHC’s shares have rallied 41.8% against the industry’s 32.8% decline over the past year.