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STERIS (STE) Q4 Earnings Match Estimates, Margins Contract
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STERIS plc (STE - Free Report) reported fourth-quarter fiscal 2024 adjusted earnings per share (EPS) of $2.41, up 4.8% from the year-ago quarter’s figure. The figure matched the Zacks Consensus Estimate.
The adjustment excludes the impacts of certain non-recurring charges like the amortization of acquired intangible assets and acquisition and integration-related charges, among others.
The company’s GAAP net loss was 1 cent against the year-ago EPS of $1.88.
Revenues in Detail
Revenues of $1.42 billion from continuing operations increased 2.5% year over year in the fourth quarter. The metric lagged the Zacks Consensus Estimate by 3.1%.
Organic revenues at the constant exchange rate or CER rose 7% year over year in the fiscal fourth quarter.
Quarter in Detail
The company operates through four segments — Healthcare, Applied Sterilization Technologies (“AST”), Life Sciences and Dental.
Revenues at Healthcare rose 14% year over year to $1.01 billion (up 9% on a CER organic basis). This performance reflected a 19% improvement in capital equipment revenues, a 9% increase in service revenues and a 14% rise in consumable revenues. Going by our model, Healthcare segment revenues were expected to improve 6.6% in the fiscal fourth quarter.
Revenues at AST improved 5% to $250.9 million (up 5% on a CER organic basis). While there was 5% growth in service revenues, it was partially offset by a 43% decline in capital equipment revenues. Our model anticipated a 3.6% improvement in the segment’s revenues in the fourth quarter.
Revenues in the Life Sciences segment increased 2% to $160.6 million (up 2% year over year on a CER organic basis). This performance reflected 13% growth in service revenues and a 3% improvement in consumable revenues, partially offset by an 8% decline in capital equipment revenues. Our model’s projection was a year-over-year improvement of 2% in the segment’s revenues.
Margins
The gross profit in the reported quarter was $582.9 million, up 6.7% from the prior-year quarter. The gross margin contracted 158 basis points (bps) year over year to 41.1% despite a 13.8% rise in the cost of revenues.
STERIS witnessed a 7.7% year-over-year rise in selling, general and administrative expenses to $309.1 million. Research and development expenses rose 7.6% to $27.5 million. Adjusted operating expenses of $336.5 million increased 7.7% year over year. The adjusted operating margin contracted 91 bps to 17.4%.
Financial Details
STERIS exited fiscal 2024 with cash and cash equivalents of $207 million compared with $195.6 million at the end of the fiscal third quarter of 2024.
Cumulative net cash flow from operating activities at the end of the fiscal fourth quarter was $973.2 million, compared with $756.9 million in the year-ago period. Further, the company has a five-year annualized dividend growth rate of 8.74%.
Guidance
STERIS provided its fiscal 2025 outlook.
The company expects fiscal 2025 revenues to increase 6.5%-7.5%. Organic revenue expectation at CER stands at 6%-7%.
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $5.84 billion, implying 7.3% growth from fiscal 2024.
Adjusted EPS for fiscal 2025 is expected in the range of $9.05-$9.25. The Zacks Consensus Estimate for the metric is pegged at $9.47.
Our Take
STERIS exited the fiscal fourth quarter of 2024 with adjusted earnings matching the Zacks Consensus Estimate but revenues from continuing operations lagging the mark. The ongoing momentum of the Healthcare segment reflected solid procedure volume growth in the United States.
The addition of the surgical instrumentation assets purchased from BD was a positive factor in the strong growth of Healthcare operating income. Further, the Life Sciences segment reflected an improvement in volume and price in the quarter under review. The expansion of the gross margin bodes well for the stock.
Meanwhile, performance in AST was dented by a decline in capital equipment revenues.The contraction of margins is concerning.
Zacks Rank & Key Picks
STERIS currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the broader medical space are Medpace (MEDP - Free Report) , ResMed (RMD - Free Report) and Encompass Health Corporation (EHC - Free Report) .
Medpace, sporting a Zacks Rank #1 (Strong Buy), reported first-quarter 2024 EPS of $3.20, which beat the Zacks Consensus Estimate by 30.6%. Revenues of $511 million improved 17.7% from last year’s comparable figure. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medpace has an estimated 2024 earnings growth rate of 26.5% compared with the industry’s 12.3%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 12.8%.
ResMed, sporting a Zacks Rank #1, reported first-quarter 2024 EPS of $2.13, which topped the Zacks Consensus Estimate by 10.9%. Revenues of $1.20 billion surpassed the Zacks Consensus Estimate by 1.9%.
RMD has an estimated fiscal 2024 earnings growth rate of 17.9% compared with the industry’s 15.7%. The company delivered an average earnings surprise of 2.8% for the trailing four quarters.
Encompass Health, carrying a Zacks Rank #2, reported first-quarter 2024 adjusted EPS of $1.12, which surpassed the Zacks Consensus Estimate by 20.4%. Net operating revenues of $1.3 billion topped the Zacks Consensus Estimate by 3.6%.
EHC has an estimated long-term earnings growth rate of 15.6% compared with the industry’s 11.7% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 18.7%.
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STERIS (STE) Q4 Earnings Match Estimates, Margins Contract
STERIS plc (STE - Free Report) reported fourth-quarter fiscal 2024 adjusted earnings per share (EPS) of $2.41, up 4.8% from the year-ago quarter’s figure. The figure matched the Zacks Consensus Estimate.
The adjustment excludes the impacts of certain non-recurring charges like the amortization of acquired intangible assets and acquisition and integration-related charges, among others.
The company’s GAAP net loss was 1 cent against the year-ago EPS of $1.88.
Revenues in Detail
Revenues of $1.42 billion from continuing operations increased 2.5% year over year in the fourth quarter. The metric lagged the Zacks Consensus Estimate by 3.1%.
Organic revenues at the constant exchange rate or CER rose 7% year over year in the fiscal fourth quarter.
Quarter in Detail
The company operates through four segments — Healthcare, Applied Sterilization Technologies (“AST”), Life Sciences and Dental.
Revenues at Healthcare rose 14% year over year to $1.01 billion (up 9% on a CER organic basis). This performance reflected a 19% improvement in capital equipment revenues, a 9% increase in service revenues and a 14% rise in consumable revenues. Going by our model, Healthcare segment revenues were expected to improve 6.6% in the fiscal fourth quarter.
Revenues at AST improved 5% to $250.9 million (up 5% on a CER organic basis). While there was 5% growth in service revenues, it was partially offset by a 43% decline in capital equipment revenues. Our model anticipated a 3.6% improvement in the segment’s revenues in the fourth quarter.
STERIS plc Price, Consensus and EPS Surprise
STERIS plc price-consensus-eps-surprise-chart | STERIS plc Quote
Revenues in the Life Sciences segment increased 2% to $160.6 million (up 2% year over year on a CER organic basis). This performance reflected 13% growth in service revenues and a 3% improvement in consumable revenues, partially offset by an 8% decline in capital equipment revenues. Our model’s projection was a year-over-year improvement of 2% in the segment’s revenues.
Margins
The gross profit in the reported quarter was $582.9 million, up 6.7% from the prior-year quarter. The gross margin contracted 158 basis points (bps) year over year to 41.1% despite a 13.8% rise in the cost of revenues.
STERIS witnessed a 7.7% year-over-year rise in selling, general and administrative expenses to $309.1 million. Research and development expenses rose 7.6% to $27.5 million. Adjusted operating expenses of $336.5 million increased 7.7% year over year. The adjusted operating margin contracted 91 bps to 17.4%.
Financial Details
STERIS exited fiscal 2024 with cash and cash equivalents of $207 million compared with $195.6 million at the end of the fiscal third quarter of 2024.
Cumulative net cash flow from operating activities at the end of the fiscal fourth quarter was $973.2 million, compared with $756.9 million in the year-ago period. Further, the company has a five-year annualized dividend growth rate of 8.74%.
Guidance
STERIS provided its fiscal 2025 outlook.
The company expects fiscal 2025 revenues to increase 6.5%-7.5%. Organic revenue expectation at CER stands at 6%-7%.
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $5.84 billion, implying 7.3% growth from fiscal 2024.
Adjusted EPS for fiscal 2025 is expected in the range of $9.05-$9.25. The Zacks Consensus Estimate for the metric is pegged at $9.47.
Our Take
STERIS exited the fiscal fourth quarter of 2024 with adjusted earnings matching the Zacks Consensus Estimate but revenues from continuing operations lagging the mark. The ongoing momentum of the Healthcare segment reflected solid procedure volume growth in the United States.
The addition of the surgical instrumentation assets purchased from BD was a positive factor in the strong growth of Healthcare operating income. Further, the Life Sciences segment reflected an improvement in volume and price in the quarter under review. The expansion of the gross margin bodes well for the stock.
Meanwhile, performance in AST was dented by a decline in capital equipment revenues.The contraction of margins is concerning.
Zacks Rank & Key Picks
STERIS currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the broader medical space are Medpace (MEDP - Free Report) , ResMed (RMD - Free Report) and Encompass Health Corporation (EHC - Free Report) .
Medpace, sporting a Zacks Rank #1 (Strong Buy), reported first-quarter 2024 EPS of $3.20, which beat the Zacks Consensus Estimate by 30.6%. Revenues of $511 million improved 17.7% from last year’s comparable figure. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medpace has an estimated 2024 earnings growth rate of 26.5% compared with the industry’s 12.3%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 12.8%.
ResMed, sporting a Zacks Rank #1, reported first-quarter 2024 EPS of $2.13, which topped the Zacks Consensus Estimate by 10.9%. Revenues of $1.20 billion surpassed the Zacks Consensus Estimate by 1.9%.
RMD has an estimated fiscal 2024 earnings growth rate of 17.9% compared with the industry’s 15.7%. The company delivered an average earnings surprise of 2.8% for the trailing four quarters.
Encompass Health, carrying a Zacks Rank #2, reported first-quarter 2024 adjusted EPS of $1.12, which surpassed the Zacks Consensus Estimate by 20.4%. Net operating revenues of $1.3 billion topped the Zacks Consensus Estimate by 3.6%.
EHC has an estimated long-term earnings growth rate of 15.6% compared with the industry’s 11.7% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 18.7%.