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Reasons to Add STE Stock to Your Portfolio Right Now
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Key Takeaways
STE's Healthcare sales rose 8% to $1.05 billion in fiscal first-quarter, driven by services and consumables.
AST sales grew 6% to $297.6 million, with growth expected to improve in the second half as destocking eases.
Life Sciences organic revenues rose 8%, while tariff costs of $14 million and inflation pose margin risks.
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. Healthcare and Life Sciences markets continue to see strong demand, supported by procedure volumes, infection prevention needs and investments in manufacturing infrastructure. Macroeconomic volatilities raise concerns for the company.
Over the past year, this Zacks Rank #2 (Buy) company’s shares have lost 8.3% against the industry’s 7.7% growth. The S&P 500 composite has risen 16.6% over the period.
The renowned provider of infection prevention and other procedural products and services has a market capitalization of $21.18 billion. STE delivered an average earnings surprise of 1.18% for the trailing four quarters.
Let’s delve deeper.
Positive Factors for STERIS
Promising Healthcare Business: The Healthcare segment is benefiting from market adoption of infection prevention consumables, capital equipment and recurring services. In the first quarter of fiscal 2027, Healthcare revenues rose 8% to $1.05 billion, with services up 10%, consumables up 9% and capital equipment up 1%. Constant currency organic growth was 6%. Consumables benefited from higher customer consumption, endoscopy procedure growth and share gains.
Capital equipment orders increased 4% despite shipment timing, and backlog rose to $444 million from just under $400 million at the end of fiscal 2026. Healthcare EBIT margin expanded 60 basis points (bps) to 24.8%, supported by higher volume, pricing, productivity and favorable mix, partly offset by inflation, business investment and tariffs.
Strong Rebound Prospects in the AST Segment: STERIS’ technology-neutral contract sterilization network supports medical device and pharmaceutical customers through multiple sterilization modalities and laboratory services. AST generated more than $1 billion of revenues in fiscal 2026, with services up 11% and operating profit above $500 million.
In the first quarter of fiscal 2027, AST revenues increased 6% to $297.6 million, while constant currency organic growth was 5%, and services grew 6%. Volumes remained light as customers continued to reduce inventories after difficult prior-year comparisons. AST destocking is expected to persist through the fiscal second quarter, with growth improving in the second half as comparisons ease.
Progress in Healthcare and Pharmaceutical Industries: STERIS derives most of its revenues from healthcare and pharmaceutical markets, where demand is supported by procedure activity, infection prevention needs and investment in manufacturing capacity. In the first quarter of fiscal 2027, management reported no slowdown in procedure volumes, with particularly strong growth in endoscopy.
Image Source: Zacks Investment Research
Life Sciences constant currency organic revenues increased 8% in the quarter, with capital equipment up 17% and consumables up 8%, as customers continued investing in manufacturing infrastructure. STERIS also announced a $600 million formulated chemistries Center of Excellence in North Carolina that will combine manufacturing, R&D and distribution for Healthcare and Life Sciences products, generating more than $700 million of revenues.
What Ails STE Stock?
Macroeconomic and Cost Pressures: Tariffs, inflation and healthcare cost-containment efforts remain risks to STERIS’ profitability. In the first quarter of fiscal 2027, gross tariff costs were $14 million compared with $12 million a year earlier. The company also received $4 million of tariff refunds during the quarter, which partly reduced the impact. Management indicated that tariff costs are likely to remain part of the operating environment. Inflation also partly offset pricing and productivity gains in Healthcare and Life Sciences. If these cost pressures persist, they could limit further margin expansion and reduce the earnings benefit from revenue growth.
STE Stock Estimate Trend
The Zacks Consensus Estimate for fiscal 2027 earnings per share (EPS) has remained unchanged at $11.12.
The consensus mark for fiscal 2027 revenues is pegged at $6.37 billion, which suggests 7.3% growth from the fiscal 2026 reported number.
Phibro Animal Health has an earnings yield of 9.3% compared with the industry’s 2.7% yield. Shares of the company have risen 2.6% against the industry’s 27.9% decline over the past year. PAHC’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 18.4%.
Abbott, carrying a Zacks Rank #2 at present, has an earnings yield of 5.6% compared with the industry’s 2.6% yield. Its earnings beat estimates in each of the trailing four quarters, the average surprise being 0.8%. ABT shares have plunged 22.5% compared with the industry’s 27.9% decline over the past year.
Globus Medical, currently carrying a Zacks Rank #2, has an earnings yield of 6.8% against the industry’s negative 1.7% yield. Its earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 27.9%. GMED shares have rallied 32.6% compared with the industry’s 7.3% growth over the past year.
View the Zacks #1 Rank List
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Reasons to Add STE Stock to Your Portfolio Right 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. Healthcare and Life Sciences markets continue to see strong demand, supported by procedure volumes, infection prevention needs and investments in manufacturing infrastructure. Macroeconomic volatilities raise concerns for the company.
Over the past year, this Zacks Rank #2 (Buy) company’s shares have lost 8.3% against the industry’s 7.7% growth. The S&P 500 composite has risen 16.6% over the period.
The renowned provider of infection prevention and other procedural products and services has a market capitalization of $21.18 billion. STE delivered an average earnings surprise of 1.18% for the trailing four quarters.
Let’s delve deeper.
Positive Factors for STERIS
Promising Healthcare Business: The Healthcare segment is benefiting from market adoption of infection prevention consumables, capital equipment and recurring services. In the first quarter of fiscal 2027, Healthcare revenues rose 8% to $1.05 billion, with services up 10%, consumables up 9% and capital equipment up 1%. Constant currency organic growth was 6%. Consumables benefited from higher customer consumption, endoscopy procedure growth and share gains.
Capital equipment orders increased 4% despite shipment timing, and backlog rose to $444 million from just under $400 million at the end of fiscal 2026. Healthcare EBIT margin expanded 60 basis points (bps) to 24.8%, supported by higher volume, pricing, productivity and favorable mix, partly offset by inflation, business investment and tariffs.
Strong Rebound Prospects in the AST Segment: STERIS’ technology-neutral contract sterilization network supports medical device and pharmaceutical customers through multiple sterilization modalities and laboratory services. AST generated more than $1 billion of revenues in fiscal 2026, with services up 11% and operating profit above $500 million.
In the first quarter of fiscal 2027, AST revenues increased 6% to $297.6 million, while constant currency organic growth was 5%, and services grew 6%. Volumes remained light as customers continued to reduce inventories after difficult prior-year comparisons. AST destocking is expected to persist through the fiscal second quarter, with growth improving in the second half as comparisons ease.
Progress in Healthcare and Pharmaceutical Industries: STERIS derives most of its revenues from healthcare and pharmaceutical markets, where demand is supported by procedure activity, infection prevention needs and investment in manufacturing capacity. In the first quarter of fiscal 2027, management reported no slowdown in procedure volumes, with particularly strong growth in endoscopy.
Image Source: Zacks Investment Research
Life Sciences constant currency organic revenues increased 8% in the quarter, with capital equipment up 17% and consumables up 8%, as customers continued investing in manufacturing infrastructure. STERIS also announced a $600 million formulated chemistries Center of Excellence in North Carolina that will combine manufacturing, R&D and distribution for Healthcare and Life Sciences products, generating more than $700 million of revenues.
What Ails STE Stock?
Macroeconomic and Cost Pressures: Tariffs, inflation and healthcare cost-containment efforts remain risks to STERIS’ profitability. In the first quarter of fiscal 2027, gross tariff costs were $14 million compared with $12 million a year earlier. The company also received $4 million of tariff refunds during the quarter, which partly reduced the impact. Management indicated that tariff costs are likely to remain part of the operating environment. Inflation also partly offset pricing and productivity gains in Healthcare and Life Sciences. If these cost pressures persist, they could limit further margin expansion and reduce the earnings benefit from revenue growth.
STE Stock Estimate Trend
The Zacks Consensus Estimate for fiscal 2027 earnings per share (EPS) has remained unchanged at $11.12.
The consensus mark for fiscal 2027 revenues is pegged at $6.37 billion, which suggests 7.3% growth from the fiscal 2026 reported number.
Other Key Picks
Some other top-ranked stocks in the broader medical space are Phibro Animal Health (PAHC - Free Report) , Abbott (ABT - Free Report) and Globus Medical (GMED - Free Report) .
Phibro Animal Health has an earnings yield of 9.3% compared with the industry’s 2.7% yield. Shares of the company have risen 2.6% against the industry’s 27.9% decline over the past year. PAHC’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 18.4%.
PAHC sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Abbott, carrying a Zacks Rank #2 at present, has an earnings yield of 5.6% compared with the industry’s 2.6% yield. Its earnings beat estimates in each of the trailing four quarters, the average surprise being 0.8%. ABT shares have plunged 22.5% compared with the industry’s 27.9% decline over the past year.
Globus Medical, currently carrying a Zacks Rank #2, has an earnings yield of 6.8% against the industry’s negative 1.7% yield. Its earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 27.9%. GMED shares have rallied 32.6% compared with the industry’s 7.3% growth over the past year.