STERIS plc STE reported third-quarter fiscal 2025 adjusted earnings per share (EPS) of $2.32, up 9.9% from the year-ago quarter’s figure. The figure is in line with the Zacks Consensus Estimate.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The adjustment excludes the impacts of certain non-recurring charges, such as the amortization of acquired intangible assets and acquisition and integration-related charges.
The company’s GAAP EPS was $1.75, up 17.4% from the year-ago level of $1.49.
Following the earnings announcement, STE stock rose 0.01% at after-market trading yesterday.
STE’s Q3 Revenues in Detail
Revenues of $1.37 billion from continuing operations increased 5.6% year over year. The figure missed the Zacks Consensus Estimate by 0.7%.
Organic revenues at constant exchange rate or CER rose 6% year over year.
STE’s Quarterly Performance in Detail
The company operates under three segments — Healthcare, Applied Sterilization Technologies (“AST”) and Life Sciences.
Revenues at Healthcare rose 7% year over year to $976.0 million (up 7% on a CER organic basis). While consumable revenues improved 9% and service revenues increased 13%, these were partially offset by a 5% decline in capital equipment revenues. Our model expected Healthcare segment revenues to improve 6.2% in the fiscal third quarter.
Revenues at AST improved 10% to $258.1 million (up 10% on a CER organic basis). This performance reflected 10% growth in service revenues, offset by a 5% decline in capital equipment revenues. Our model anticipated an 8.9% improvement in the segment’s quarterly revenues.
Revenues from the Life Sciences segment decreased 7% to $136.4 million (up 1% year over year on a CER organic basis). The decline in revenues was due to the divestiture of the CECS business. This performance reflected 14% growth in consumable revenues, offset by a 31% decline in capital equipment revenues and a 12% drop in service revenues. Our model projected a year-over-year improvement of 2.3% for the segment’s revenues.
Margins
The gross profit in the reported quarter was $610.3 million, up 9% from the prior-year level. The gross margin expanded 138 basis points (bps) year over year to 44.5% despite a 3.1% increase in the cost of revenues.
STERIS witnessed an 8.8% year-over-year rise in selling, general and administrative expenses. The figure amounted to $335.4 million. Research and development expenses rose 8.3% to $27.4 million. Adjusted operating expenses totaled $362.8 million, up 8.8% year over year. The adjusted operating margin expanded 61 bps to 18.1%.
Financial Details
STERIS exited the third quarter of fiscal 2025 with cash and cash equivalents of $155.2 million compared with $172.2 million at the end of the fiscal second quarter.
Cumulative net cash flow from operating activities at the end of the fiscal third quarter was $887.3 million compared with $718.5 million in the year-ago period. Further, the company has a five-year annualized dividend growth rate of 8.44%.
Guidance
STERIS updated its fiscal 2025 projection.
It expects revenues to increase approximately 6% (earlier 6.5-7.5%). Constant currency organic revenues are expected to improve approximately 6% (earlier 6-7%).
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $5.48 billion, implying 0.7% growth from fiscal 2024.
Adjusted EPS is expected to be in the range of $9.05-$9.15 (earlier $9.05-$9.25). The Zacks Consensus Estimate for the metric is pegged at $9.08.
Our Take
STERIS’ third-quarter fiscal 2025 earnings met estimates but revenues missed the same. Barring the Life Sciences segment, all other business segments experienced growth during the quarter. The ongoing growth momentum can be attributed to a solid procedure volume rebound in the United States, along with favorable pricing. Meanwhile, performance in Life Sciences was dented due to the divestiture of the CECS business.
The expansion of both margins bodes well for the stock. Additionally, the company has lowered its fiscal 2025 revenue guidance, which looks discouraging.
STE’s Zacks Rank & Key Picks
STE currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader medical space are Quest Diagnostics DGX, ResMed RMD and Cardinal Health CAH.
Quest Diagnostics reported fourth-quarter 2024 adjusted EPS of $2.23, which topped the Zacks Consensus Estimate by 1.8%. Revenues of $2.62 billion beat the Zacks Consensus Estimate by 1.9%. DGX carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DGX has an earnings yield of 5.9% compared with the industry’s 4.1%. The company beat on earnings in each of the trailing four quarters, the average surprise being 3.8%.
ResMed, carrying a Zacks Rank #2 at present, posted second-quarter fiscal 2025 adjusted EPS of $2.43, which topped the Zacks Consensus Estimate by 5.6%. Revenues of $1.28 billion exceeded the Zacks Consensus Estimate by 1.6%.
RMD has an estimated fiscal 2025 earnings growth rate of 21.9% compared with the industry’s 13.2%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.9%.
Cardinal Health, carrying a Zacks Rank #2 at present, posted second-quarter fiscal 2025 adjusted EPS of $1.93, which topped the Zacks Consensus Estimate by 10.3%. Revenues of $55.26 billion exceeded the Zacks Consensus Estimate by 0.7%.
CAH has an estimated five-year earnings growth rate of 10.7% compared with the industry’s 9.3%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 9.6%.
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