STERIS plc’s STE growth in the fiscal second quarter of 2025 can be attributed to the robust performance of its Healthcare business. The company also benefits from the strong rebound prospects for its Applied Sterilization Technologies (“AST”) segment.

Meanwhile, headwinds such as foreign currency risks and fierce competitive pressure are concerning.

Year to date, shares of this Zacks Rank #3 (Hold) company have lost 2.1% against the industry’s 7.6% growth and the S&P 500’s 18.4% increase.

The renowned provider of infection prevention and other procedural products and services has a market capitalization of $21.15 billion. STE’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 1.18%.

STERIS: Key Upsides

Promising Healthcare Business: The 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 that 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 indicates a 12% improvement in consumable revenues and 14% growth in service revenues, driven by procedure volumes in the United States as well as price and market share gains. Healthcare achieved 7% constant currency organic revenue growth for the quarter. The success can be attributed to the actions of its operation team to reduce lead times and return backlog to normal levels. 

Strong Rebound Prospects in the AST Segment: This technology-neutral contract sterilization service successfully offers a wide range of sterilization modalities through a worldwide network of more than 50 contract sterilization and laboratory facilities. In the fiscal second quarter, the AST division experienced 9% reported growth year over year. 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 were in the high single digits. STERIS experienced its first signs of increased bioprocessing demand. Meanwhile, global MedTech customers were stable.

STERIS: Key Downsides

Foreign Currency Risks: With nearly 30% of the company’s revenues and cost of revenues being generated outside the United States, foreign currency exchange rate fluctuations can significantly affect its financial position, results of operations and competitive position. In the fiscal second quarter, revenues were negatively impacted by currency fluctuations of nearly $2.1 million.

Competitive Landscape: STERIS competes for pharmaceutical, research and industrial customers against several large companies with robust product portfolios and global reach, as well as several small companies with limited product offerings and operations in one or a few countries. STERIS’ Life Sciences segment operates in highly regulated environments where the most intense competition results from technological innovations, product performance, convenience and ease of use, and cost-effectiveness.  The company expects to continue to face competition in the future as new infection prevention, sterile processing, contamination control, gastrointestinal and surgical support products and services enter the market. 

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Estimate Trends

In the past 30 days, the Zacks Consensus Estimate for STERIS’ fiscal 2025 earnings increased 0.9% to $9.10 per share.

The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $5.48 billion, which suggests 0.8% growth from the fiscal 2024 reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Haemonetics HAE, Penumbra PEN and Globus Medical GMED.

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%. HAE’s shares have risen 3.6% compared with the industry’s 19.9% growth in the past year.

HAE carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Penumbra, carrying a Zacks Rank #2 at present, has an estimated 2024 earnings growth rate of 33.5% compared with the industry’s 15.9%. Shares of Penumbra have risen 3.2% compared with the industry’s 14.5% growth in the past year. PEN’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 10.54%.

Globus Medical, carrying a Zacks Rank #3 at present, has a long-term estimated growth rate of 14.1%. Shares of the company have rallied 81.8% compared with the industry’s 14.5% growth. GMED’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 17.65%.

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