It has been about a month since the last earnings report for Steris (STE). Shares have added about 3% in that time frame, outperforming 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.

STE Q3 Earnings In Line, '25 Sales View Cut

STERIS plc 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 was in line with the Zacks Consensus Estimate. 

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.  

STE’s 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.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Steris has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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 C. 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.

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STERIS plc (STE) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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