STERIS plc (STE - Free Report) has been gaining investor confidence on consistently positive results. Over the past year, the company has rallied 28.9% against its industry’s 1.5% decline. Also, the company has outperformed the S&P 500’s 14.4% gain.
This developer, manufacturer and marketer of infection prevention, decontamination, microbial reduction plus surgical and gastrointestinal support products and services has a market cap of $8.80 billion. The company’s long-term historical earnings growth rate of 12.2% is higher than the S&P 500’s 4.4% tally.
With solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment.
The company’s estimate revision trend for the current year has been positive. In the past 60 days, two analyst revised estimates upward while there was no movement in the opposite direction. However, earnings estimates remained flat at $4.71.
Let’s find out whether the latest trend is a sustainable one.
Solid Quarterly Performance
STERIS exited fourth-quarter fiscal 2018 with better-than-expected earnings and revenues. We are also encouraged by the favorable underlying market trend along with new product and service offerings. The company's strong organic growth across specialty services, life sciences and applied sterilization segments also buoys optimism.
Synergy Health Consolidation on Track
STERIS’ acquisition of U.K.-based outsourced sterilization services provider, Synergy Health plc, has continued to remain a significant move by the company as it combines STERIS' Infection Prevention and Services businesses with Synergy Health's Hospital Sterilization Services. Earlier, management said that it expects to save at least $45 million by the end of fiscal 2019 with the balance evenly divided between the next two fiscals. The company also anticipates about $10 million of cost synergies this year from the Synergy Health transaction and another $10 million, next fiscal.
Strategic Buyouts and Divestments
STERIS has been of late looking to expand in the adjacent markets through acquisitions and dilutions. Following the Synergy Health acquisition, the company sold the Synergy Health Healthcare Consumable Solutions (HCS) business to Vernacare last November.
This apart, the company made six consolidations in fiscal 2018 via which, it aims at strengthening the Healthcare Products, Healthcare Specialty Services and the Applied Sterilization Technologies businesses.
Solid Balance Sheet Position
STERIS exited fiscal 2018 with cash and cash equivalents of $201.5 million compared with $282.9 million at the end of fiscal 2017. The company’s long-term debt at the end of fourth-quarter fiscal 2018 was $1.32 billion compared with $1.48 billion a year ago.
Other Key Picks
A few other top-ranked stocks in the broader medical sector are Genomic Health (GHDX - Free Report) , Abiomed (ABMD - Free Report) and Stryker Corp. (SYK - Free Report) .
Genomic Health has an expected earnings growth rate of 187.5% for the current quarter. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Abiomed has a projected long-term earnings growth rate of 27% and a Zacks Rank of 1.
Stryker has a projected long-term earnings growth rate of 9.7% and a Zacks Rank of 2.
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