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STE Q4 Earnings Beat, Margins Expand, Stock Up in Aftermarket
STERIS plc STE reported fourth-quarter fiscal 2025 adjusted earnings per share (EPS) of $2.74, up 13.7% from the year-ago quarter’s figure. The figure surpassed the Zacks Consensus Estimate by 5.8%.
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 $1.48, down 3.9% from the year-ago level of $1.54.
Full-year fiscal 2025 adjusted EPS was $9.22, up 12.4% from the year-ago quarter’s figure. The bottom line surpassed the Zacks Consensus Estimate by 1.4%.
Following the earnings announcement, STE stock rose 1.8% in after-market trading yesterday.
STE’s Revenues in Detail
Revenues of $1.48 billion from continuing operations increased 4.2% year over year. The figure missed the Zacks Consensus Estimate by 0.1%.
Organic revenues at constant exchange rate or CER rose 6% year over year.
Full-year fiscal 2025 revenues of $5.46 billion from continuing operations increased 6.2% year over year. The figure matched the Zacks Consensus Estimate.
STE’s Quarterly Performance in Detail
The company operates under three segments — Healthcare, Applied Sterilization Technologies (“AST”) and Life Sciences.
Revenues at Healthcare rose 5% year over year to $1.10 billion (up 6% on a CER organic basis). While consumable revenues improved 6% and service revenues increased 13%, these were partially offset by a 4% decline in capital equipment revenues. Our model expected Healthcare segment revenues to improve 4.1% in the fiscal fourth quarter.
Revenues at AST improved 9% to $273.9 million (up 10% on a CER organic basis). This performance reflected 6% growth in service revenues and an increase in capital equipment revenues. Our model anticipated a 9% improvement in the segment’s quarterly revenues.
Revenues from the Life Sciences segment decreased 7% to $149.5 million (flat year over year on a CER organic basis). The decline was due to the divestiture of the CECS business. This performance reflected 8% growth in consumable revenues, offset by a 16% decline in capital equipment revenues and a 21% drop in service revenues. Our model projected a year-over-year decline of 1.5% for the segment’s revenues. (See the Zacks Earnings Calendar to stay ahead of market-making news).
Margins
The gross profit in the reported quarter was $641.2 million, up 10% from the prior-year level. The gross margin expanded 224 basis points (bps) year over year to 43.3% despite a 0.3% increase in the cost of revenues.
STERIS witnessed an 8% year-over-year rise in selling, general and administrative expenses. The figure amounted to $333.9 million. Research and development expenses rose 0.8% to $27.7 million. Adjusted operating expenses totaled $361.6 million, up 7.4% year over year. The adjusted operating margin expanded 153 bps to 18.9%.
Financial Details
STERIS exited fiscal 2025 with cash and cash equivalents of $171.7 million compared with $207 million at the end of fiscal 2024.
Cumulative net cash flow from operating activities at the end of the fiscal fourth quarter was $1.15 billion compared with $973.2 million in the year-ago period. Further, the company has a five-year annualized dividend growth rate of 9.31%.
Guidance
STERIS provided its fiscal 2026 projection.
It expects revenues from continuing operations to increase approximately 6-7%. The Zacks Consensus Estimate is pegged at $5.78 billion, implying 5.9% growth from fiscal 2025.
Constant currency organic revenues are also expected to improve approximately 6-7%.
Adjusted EPS is expected to be in the range of $9.90-$10.15. The Zacks Consensus Estimate for the metric is pegged at $9.94.
Our Take
STERIS ended fourth-quarter fiscal 2025 on a mixed note, wherein earnings beat estimates but revenues missed the same. Barring the Life Sciences segment, all other business segments experienced growth during the quarter. The ongoing growth momentum is driven by solid improvement in global procedure volumes and a diversified customer base. Meanwhile, performance in Life Sciences was dented by the divestiture of the CECS business.
The expansion of both margins bodes well for the stock.
STE’s Zacks Rank & Other Key Picks
STE currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the broader medical space are AngioDynamics ANGO, Integer Holdings Corporation ITGR and Phibro Animal Health PAHC.
AngioDynamics, currently sporting a Zacks Rank #1 (Strong Buy), reported a third-quarter fiscal 2025 adjusted EPS of 3 cents against the Zacks Consensus Estimate of a loss of 13 cents. Revenues of $72 million beat the Zacks Consensus Estimate by 2%. You can see the complete list of today’s Zacks #1 Rank stocks here.
ANGO has an estimated fiscal 2026 earnings growth rate of 27.8% compared with the S&P 500 composite’s 10.5%. The company surpassed earnings estimates in each of the trailing four quarters, the average surprise being 70.9%.
Integer Holdings, sporting a Zacks Rank #1 at present, posted a first-quarter 2025 adjusted EPS of $1.31, which outpaced the Zacks Consensus Estimate by 3.1%. Revenues of $437.4 million surpassed the Zacks Consensus Estimate by 1.3%.
ITGR has an estimated long-term earnings growth rate of 20.8% compared with the industry’s 14.3%. The company’s earnings surpassed estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 2.8%.
Phibro Animal Health, currently carrying a Zacks Rank #1, reported a third-quarter fiscal 2025 adjusted EPS of 63 cents, which surpassed the Zacks Consensus Estimate by 21.1%. Revenues of $347.8 million missed the Zacks Consensus Estimate by 0.7%.
PAHC has an estimated long-term earnings growth rate of 26% compared with the industry’s 15.8%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 30.6%.
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