On Jun 15, we issued an updated research report on STERIS plc (STE - Free Report) . The company has been actively trying to expand into the adjacent markets and fortify its core business through acquisitions and divestments. However, a tough competitive landscape and currency headwinds persistently pose threats to STERIS. The stock currently carries a Zacks Rank #3 (Hold).
Over the past six months, STERIS has been outperforming its industry. The stock has declined 1.7% compared with 3.8% fall of the industry. In the fourth quarter of fiscal 2020, STERIS’ instrument repair business was relatively insulated as many of the customers opted for more comprehensive maintenance of their instruments. Within consumables in Life Sciences, the company saw an upward spike in the fourth quarter, partially due to COVID-19.
Some of the pharma customers appear to have stockpiled the products, resulting in 26% growth in the fourth quarter in Life Science consumables. The company saw a similar trend in April as well. Within Healthcare Products, organic growth continued to stem from new product launches, particularly in infection prevention, capital equipment and consumables franchise. Given the timing of the company’s financial year end, STERIS witnessed a relatively limited impact of the pandemic on its business.
A major landmark for the company, in fiscal 2020, was when it broke the $3 billion revenue mark for the first time and joined the coveted S&P 500 Index. Through the fiscal, the company witnessed strong top-line gains on favorable underlying market growth, resulting from customer adoptions along with new product and service offerings. It ended the year with a very strong balance sheet and is looking forward to another year of solid growth performance in fiscal 2021.
Meanwhile, a decline in outsourced reprocessing business resulting from a fall in procedures due to COVID-19 is concerning. Healthcare Products, especially endoscopy products, faced the immediate impact of revenue loss due to the pandemic. Fall in non-essential procedures across America also impacted the top line.
Further, escalating operating expenses are denting the bottom line. Also, STERIS competes for pharmaceutical, research and industrial customers with several bigwigs boasting extensive product portfolios and global reach.
Some better-ranked stocks from the broader medical space are Quest Diagnostics Incorporated (DGX - Free Report) , Hologic, Inc. (HOLX - Free Report) and QIAGEN N.V. (QGEN - Free Report) .
Quest Diagnostics’ long-term earnings growth rate is projected at 7.6%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hologic’s long-term earnings growth rate is estimated at 7%. The company presently has a Zacks Rank #2.
QIAGEN’s long-term earnings growth rate is estimated at 12.2%. It currently sports a Zacks Rank #1.
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