Shares of STERIS plc (STE) plummeted 6.37% on Wednesday, November 7, despite the company reporting better-than-expected earnings for the second quarter of fiscal 2025. The stock's decline suggests that investors were concerned about margin pressure and weaker-than-anticipated revenue growth.
The medical equipment and services provider reported adjusted earnings per share of $2.14, surpassing the consensus estimate of $2.12 and representing a 15.1% increase from the year-ago quarter. However, revenues of $1.33 billion fell slightly short of analysts' expectations of $1.33 billion, rising 7.3% year-over-year.
A key factor contributing to STERIS's stock price decline was the contraction in gross margin, which fell 56 basis points to 43.6% due to an 8.4% increase in the cost of revenues. The company's adjusted operating margin expanded by 127 basis points to 16.7%, but this improvement was not enough to alleviate investors' concerns about profitability pressures.
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