STERIS STE continues to gain from a strong rebound in procedure volumes in the United States within the Healthcare business. New acquisitions and partnerships should strengthen its product offerings. Yet macroeconomic challenges continue to dampen growth. The stock carries a Zacks Rank #3 (Hold) currently.

Factors Driving STERIS' Growth

STERIS’ Healthcare segment is gaining from the successful market adoption of its comprehensive offerings, including infection prevention consumables and capital equipment. Further, its services to maintain the equipment, repair reusable procedural instruments and outsource instrument reprocessing services are gaining traction. For the fiscal second quarter, Healthcare reported revenue growth of 9% year over year. This outperformance indicated a 12% improvement in consumable revenues and 14% growth in service revenues, with both segments posting strong organic revenue growth.

The Applied Sterilization Technologies (AST) division experienced 9% reported growth year over year in the second quarter of fiscal 2025. This performance was driven by a 6% increase in service revenues and a significant improvement in capital equipment revenues. Constant currency organic revenues in the fiscal second quarter rose in high single digits. STERIS experienced its first signs of increased bioprocessing demand. Meanwhile, global MedTech customers were stable. The company expects bioprocessing revenues to grow in the second half of fiscal 2025.

Further, STERIS frequently engages in strategic acquisitions and joint ventures to optimize its portfolio of businesses. In recent years, the company has made several large acquisitions. It purchased the surgical instrumentation, laparoscopic instrumentation and sterilization container assets from Becton, Dickinson and Company or BD. The acquisition strengthens, complements and expands STERIS’ Healthcare product offerings with renowned brands like V. Mueller, Snowden-Pencer and Genesis. The company is poised for another strong fiscal year, with reported revenues from continuing operations expected to grow 6% to 7%.

Year to date, shares of STE dropped 1.7% against the industry’s 4.9% growth. However, as the company continues to experience increased bioprocessing demand, this might help the AST business to gain further momentum. Added to this, several strategic acquisitions and partnerships are expected to help the stock to witness an uptrend in the coming days.

STERIS plc Price

STERIS plc price | STERIS plc Quote

Concerning Factors for STE

The current macroeconomic environment across the globe has affected STERIS’ financial operations. Governments and insurance companies continue to look for ways to contain the rising cost of healthcare. This is significantly putting pressure on players in the healthcare industry, with STERIS being no exception. Increases in prices or decreases in the availability of raw materials and oil and gas have also historically impaired STERIS’ procurement of necessary materials for product manufacture, leading to an increase in production costs. In addition, economic and market volatility have been affecting the investment portfolio of STERIS’ legacy defined benefit pension plan. We are concerned that lingering macroeconomic softness might hamper STERIS’ growth.

These macroeconomic factors are also resulting in a significant escalation in the company’s operating expenses. STERIS witnessed a 0.3% year-over-year rise in selling, general and administrative expenses in the fiscal second quarter. Our model projects a 10.9% increase in the company’s selling, general and administrative expenses in fiscal 2025.

Further, with nearly 30% of the company’s revenues and costs of revenues being generated outside the United States, foreign currency exchange rate fluctuations can significantly impact its financial position, results of operations, and competitive position. For most operations, local currencies have been determined to be the functional currencies. For example, the ongoing geopolitical instability, such as Russia’s invasion of Ukraine, has negatively impacted the global and U.S. economies, leading to supply-chain disruptions, rising interest rates, volatility in capital markets and foreign currency exchange rates, and heightened cybersecurity risks. In the fiscal second quarter of 2025, the company’s revenues were negatively impacted by currency fluctuations of nearly $2.1 million.

Key Picks

Some better-ranked stocks in the broader medical space are Haemonetics HAE, Penumbra PEN and ResMed RMD. While ResMed sports a Zacks Rank #1 (Strong Buy) at present, Haemonetics and Penumbra carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Haemonetics has an earnings yield of 5.02% compared with the industry’s 1.18%. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 19.39%. Its shares have risen 1.8% compared with the industry’s 23.1% growth in the past year. Estimates for Haemonetics’ 2025 EPS have moved 0.4% north to $4.59 in the past 30 days.

Estimates for Penumbra’s 2024 EPS have moved 8.1% north to $2.79 in the past 30 days. Shares of the company have surged 60.6% in the past year compared with the industry’s growth of 32.7%. PEN’s earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 10.54%.

Estimates for ResMed’s fiscal 2025 EPS have risen 2.7% in the past 30 days. Shares of the company have surged 86.3% in the past year compared with the industry’s 32.1% growth. RMD’s earnings surpassed estimates in each of the trailing four quarters, the average beat being 6.4%. In the last reported quarter, it delivered an earnings surprise of 8.4%.

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