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Steris (STE) Up 2% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Steris (STE). Shares have added about 2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Steris due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

STERIS Q4 Earnings Match Estimates, Margins Crash

STERIS plc reported fourth-quarter fiscal 2024 adjusted earnings per share of $2.41, up 4.8% from the year-ago quarter’s figure. The figure matched the Zacks Consensus Estimate.

廣告

The adjustment excludes the impacts of certain non-recurring charges like the amortization of acquired intangible assets and acquisition and integration-related charges, among others.

The company’s GAAP net loss was 1 cent against the year-ago EPS of $1.88.

Revenues in Detail

Revenues of $1.42 billion from continuing operations increased 2.5% year over year in the fourth quarter. The metric lagged the Zacks Consensus Estimate by 3.1%.

Organic revenues at the constant exchange rate or CER rose 7% year over year in the fiscal fourth quarter.

Quarter in Detail

The company operates through four segments — Healthcare, Applied Sterilization Technologies (“AST”), Life Sciences and Dental.

Revenues at Healthcare rose 14% year over year to $1.01 billion (up 9% on a CER organic basis). This performance reflected a 19% improvement in capital equipment revenues, a 9% increase in service revenues and a 14% rise in consumable revenues. Going by our model, Healthcare segment revenues were expected to improve 6.6% in the fiscal fourth quarter.

Revenues at AST improved 5% to $250.9 million (up 5% on a CER organic basis). While there was 5% growth in service revenues, it was partially offset by a 43% decline in capital equipment revenues. Our model anticipated a 3.6% improvement in the segment’s revenues in the fourth quarter.

Revenues in the Life Sciences segment increased 2% to $160.6 million (up 2% year over year on a CER organic basis). This performance reflected 13% growth in service revenues and a 3% improvement in consumable revenues, partially offset by an 8% decline in capital equipment revenues. Our model’s projection was a year-over-year improvement of 2% in the segment’s revenues.

Margins

The gross profit in the reported quarter was $582.9 million, up 6.7% from the prior-year quarter. The gross margin contracted 158 basis points (bps) year over year to 41.1% despite a 13.8% rise in the cost of revenues.

STERIS witnessed a 7.7% year-over-year rise in selling, general and administrative expenses to $309.1 million. Research and development expenses rose 7.6% to $27.5 million. Adjusted operating expenses of $336.5 million increased 7.7% year over year. The adjusted operating margin contracted 91 bps to 17.4%.

Financial Details

STERIS exited fiscal 2024 with cash and cash equivalents of $207 million compared with $195.6 million at the end of the fiscal third quarter of 2024.

Cumulative net cash flow from operating activities at the end of the fiscal fourth quarter was $973.2 million, compared with $756.9 million in the year-ago period. Further, the company has a five-year annualized dividend growth rate of 8.74%.

Guidance

STERIS provided its fiscal 2025 outlook.

The company expects fiscal 2025 revenues to increase 6.5%-7.5%. Organic revenue expectation at CER stands at 6. The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $5.84 billion, implying 7.3% growth from fiscal 2024.

Adjusted earnings per share for fiscal 2025 is expected in the range of $9.05-$9.25. The Zacks Consensus Estimate for the metric is pegged at $9.47.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -6.61% due to these changes.

VGM Scores

Currently, Steris has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Steris has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Steris belongs to the Zacks Medical - Instruments industry. Another stock from the same industry, Thermo Fisher Scientific (TMO), has gained 0.3% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.

Thermo Fisher reported revenues of $10.35 billion in the last reported quarter, representing a year-over-year change of -3.4%. EPS of $5.11 for the same period compares with $5.03 a year ago.

For the current quarter, Thermo Fisher is expected to post earnings of $5.13 per share, indicating a change of -0.4% from the year-ago quarter. The Zacks Consensus Estimate has changed 0% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Thermo Fisher. Also, the stock has a VGM Score of D.

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