Should You Continue to Retain STERIS Stock in Your Portfolio Now?

STERIS plc’s STE continues to thrive, fueled by strong procedure volume growth, favorable pricing and market share gains. The company is seeing early signs of increased bioprocessing demand, which is poised to support the AST (Applied Sterilization Technologies) segment’s growth in the upcoming quarters. A sound financial health also bodes well for the stock. Meanwhile, the impacts of macroeconomic challenges and adverse currency exchange raise concerns for STERIS’ operational results.In the past year, shares of this Zacks Rank #3 (Hold) company have declined 2.5% compared with the industry’s 2.5% fall. The S&P 500 Composite has risen 9.5% in the same time frame.The renowned provider of infection prevention and other procedural products and services has a market capitalization of $22.75 billion. The company has an earnings yield of 3.93% compared to the industry’s -3.15%. In the trailing four quarters, STE delivered an average earnings surprise of 0.61%.  Let’s delve deeper.STERIS’ TailwindsPromising Healthcare Business: The Healthcare segment is gaining from the successful market adoption of its comprehensive offerings, including infection prevention consumables and capital equipment. Over the past few quarters, the segment’s organic growth has been driven by continuous procedure volume growth in the United States, favorable pricing and market share gains. For the fiscal third quarter, Healthcare reported revenue growth of 7% year over year, supported by a 9% improvement in consumable revenues and 13% growth in service revenues, with both segments posting strong organic revenue growth. The company’s outperformance in consumables and services continues to be driven by procedure volumes in the United States as well as price and market share gains.Image Source: Zacks Investment ResearchStrong 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. STERIS is particularly gaining success with ethylene oxide (EO) sterilization. In the fiscal third quarter, the AST division experienced 10% reported growth year over year. This performance was driven by a 10% increase in service revenues. Constant currency organic revenues were in the low double digits. STERIS experienced its first signs of increased bioprocessing demand. Meanwhile, global demand from MedTech customers was stable. The company expects bioprocessing revenues to grow in the upcoming quarters.Favorable Solvency: As of the fiscal third quarter, STERIS had a long-term debt of $2.04 billion, down 5.6% from $2.16 billion recorded at the end of the fiscal second quarter.  The company exited the fiscal third quarter with cash and cash equivalents of $155.2 million, higher than its short-term debt of $125 million. The total debt-to-capital ratio remained at 25.2%, in line with the previous quarter’s level.Downsides for STEMacroeconomic Problems: The current macroeconomic environment across the globe has adversely affected STERIS’ financial operations. With governments and insurance companies making efforts to curb the rising cost of healthcare, these have added strain on industry players, including STERIS.  Rising costs and supply shortages of raw materials, oil and gas have also historically led to an increase in production costs. In addition, economic and market volatility have been affecting the investment portfolio of STERIS’ legacy defined benefit pension plan. We are concerned that lingering macroeconomic softness might hamper STERIS’ growth. Foreign Currency Risks: STERIS is exposed to adverse currency fluctuations, with nearly 30% of its revenues and costs of revenues being generated outside the United States. Ongoing geopolitical instability, such as Russia’s invasion of Ukraine, has led to heightened foreign currency volatility. On the fiscal third-quarter earnings call, the company cited currency headwinds impacting both revenues and profit, prompting a revised revenue growth rate forecast to approximately 6% from 6.5-7.5%.STE Estimate Revision TrendIn the past 30 days, the Zacks Consensus Estimate for STERIS’ fiscal 2025 earnings has increased 1 cent to $9.09.  The Zacks Consensus Estimate for the company’s fiscal 2025 revenues is pegged at $5.46 billion, a 0.3% increase from the fiscal 2024 reported number.Key PicksSome better-ranked stocks in the broader medical space are Veracyte VCYT, Resmed RMD and Boston Scientific BSX.Veracyte has an estimated 2024 earnings growth rate of 37.2% compared with the industry’s 15.3%. Veracyte’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 520.6%. Its shares have risen 44.5% compared with the industry’s 3.6% growth in the past year.VCYT sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Resmed, carrying a Zacks Rank #2 (Buy) at present, has an estimated fiscal 2025 earnings growth rate of 22.7% compared with the industry’s 18.8%. Shares of the company have increased 17.3% compared to the industry’s 7.7% growth. RMD’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 6.86%.Boston Scientific, carrying a Zacks Rank #2 at present, has a long-term estimated earnings growth rate of 13.3%. Shares of the company have surged 54.4% compared with the industry’s 9.7% growth. BSX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 8.29%.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Boston Scientific Corporation (BSX): Free Stock Analysis Report ResMed Inc. (RMD): Free Stock Analysis Report STERIS plc (STE): Free Stock Analysis Report Veracyte, Inc. (VCYT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks