A month has gone by since the last earnings report for Steris (STE Quick QuoteSTE - Free Report) . Shares have added about 3% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.

STERIS Q1 Earnings Beat Estimates, Operating Margin Falls

STERIS plc reported first-quarter fiscal 2025 adjusted earnings per share (EPS) of $2.03, up 10.3% from the year-ago quarter’s figure. The figure surpassed the Zacks Consensus Estimate by 2 cents.

The adjustment excludes the impacts of certain non-recurring charges, such as the amortization of acquired intangible assets and acquisition and integration-related charges, among others.

The company’s GAAP EPS was $1.41, up 7.6% from the year-ago level of $1.31.  

Revenues in Detail

Revenues of $1.28 billion from continuing operations increased 8.5% year over year. The figure outpaced the Zacks Consensus Estimate by 1.5%.

Organic revenues at the constant exchange rate or CER rose 6% year over year.

Quarter in Detail

The company operates through three segments — Healthcare, Applied Sterilization Technologies (“AST”), and Life Sciences.

Revenues at Healthcare rose 10% year over year to $901.2 million (up 5% on a CER organic basis). While there was a 23% improvement in consumable revenues and a 14% increase in service revenues, these were partially offset by a 10% decline in capital equipment revenues.  Our model expected Healthcare segment revenues to improve 6.9% in the fiscal first quarter.

Revenues at AST improved 7% to $249.8 million (up 8% on a CER organic basis). This performance reflected 7% growth in service revenues and a 24% increase in capital equipment revenues. Our model anticipated a 6.4% improvement in the segment’s revenues in the reported quarter.

Revenues in the Life Sciences segment decreased 2% to $128.5 million (up 4% year over year on a CER organic basis). The decline in revenues was due to the divestiture of the CECS business. This performance reflected 13% growth in consumable revenues, offset by a 15% decline in capital equipment revenues and a 17% decline in service revenues. Our model projected a year-over-year improvement of 5.8% in the segment’s revenues.

Margins

The gross profit in the reported quarter was $572.4 million, up 8.2% from the prior-year quarter. The gross margin expanded a marginal 4 basis points (bps) year over year to 44.7% due to an 8% rise in the cost of revenues.

STERIS witnessed a 9.5% year-over-year rise in selling, general and administrative expenses. The figure amounted to $335.6 million. Research and development expenses rose 3.6% to $25.6 million. Adjusted operating expenses of $361.2 million increased 9% year over year. The adjusted operating margin contracted 20 bps to 16.5%.

Financial Details

STERIS exited the first quarter of fiscal 2025 with cash and cash equivalents of $198.3 million compared with $207 million at the end of fiscal 2024.

Cumulative net cash flow from operating activities at the end of the fiscal first quarter was $303.7 million compared with $123.8 million in the year-ago period. Further, the company has a five-year annualized dividend growth rate of 8.44%.

Guidance

STERIS reiterated its fiscal 2025 projection.

The company expects revenues to increase 6.5-7.5%. Organic revenues are expected to be 5-7% at CER.

The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $5.48 billion, implying 7.3% growth from fiscal 2024.

Adjusted EPS is expected to be in the range of $9.05-$9.25. The Zacks Consensus Estimate for the metric is pegged at $9.16.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Steris has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, 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.

Performance of an Industry Player

Steris belongs to the Zacks Medical - Instruments industry. Another stock from the same industry, Fresenius (FMS Quick QuoteFMS - Free Report) , has gained 7.6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.

Fresenius reported revenues of $5.13 billion in the last reported quarter, representing a year-over-year change of -2.3%. EPS of $0.38 for the same period compares with $0.32 a year ago.

Fresenius is expected to post earnings of $0.42 per share for the current quarter, representing a year-over-year change of +35.5%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

Fresenius has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.