Here's How STERIS is Placed Ahead of Q1 Earnings

STERIS plc STE is expected to release first-quarter fiscal 2025 results on Aug 6.

Earnings Surprise History

STE has a strong earnings surprise history. It beat on earnings in three of the trailing four quarters and missed the same once, the average surprise being 2.21%.

In the last reported quarter, the company posted adjusted earnings per share of $2.41, in line with the Zacks Consensus Estimate.

Q1 Estimates

The Zacks Consensus Estimate for STERIS' first-quarter fiscal 2025 revenues is pegged at $1.26 billion. This suggests a decrease of 1.7% from the year-ago reported figure.

The Zacks Consensus Estimate for EPS of $2.03 indicates a year-over-year rise of 1.5%.

Estimate Revision Trend Ahead of Earnings

Estimates for STERIS' fiscal first-quarter earnings have remained constant at $2.03 per share in the past 30 days.

Let's take a look at how things might have shaped up for the MedTech major before the announcement.

Factors at Play

Healthcare

In the fiscal fourth quarter, growth across capital equipment, consumables, and services was robust, favored by positive price and high productivity. This helped the company to offset the macro challenges affecting demand in the other segments. Considering a persistent favorable pricing scenario and stabilizing macroeconomic issues, the Healthcare arm of STERIS is expected to have continued its strong momentum in the fiscal first quarter of 2025 as well.

We assume the Healthcare backlog to have finally normalized during the fiscal first quarter, as the company might have been able to ship at a faster pace than the new orders. STERIS' focus on getting back to normal lead times must have helped it in meeting customer demand. 

Additionally, in the previous earnings call, the company announced a targeted restructuring plan, which includes restructuring the Healthcare Surgical Capital business in Europe as well as other actions, including impairment of an internally developed high-capacity X-ray accelerator, product rationalizations and facility consolidations. This is likely to have benefited the Healthcare segment in the fiscal first quarter.

Our model projects the segment's revenues to improve 7.1% from the year-ago reported figure.

Applied Sterilization Technologies (AST)

Within the segment, the earlier-reported performances were adversely impacted by MedTech inventory destocking and the reduction of bioprocessing customer demand, both of which the company cites as short-term situations.

However, STE has been witnessing signs of recovery in the MedTech demand over the past couple of quarters, reflecting an improving procedure environment and the burndown of customer inventory in the United States. This impact might have lingered in the to-be-reported quarter as well.

During the fourth-quarter fiscal 2024 earnings call, the company projected no meaningful bioprocessing growth until the second half of fiscal 2025.

Per our model, the AST segment's revenues for the fiscal first quarter are likely to increase 6.4% year over year.

Life Sciences

STERIS, in its fiscal 2025 guidance, has mentioned a full-year impact from the divestiture of the Controlled Environmental Services business within the Life Sciences segment. This might have contributed to its revenues in the to-be-reported quarter. The Life Sciences business segment has ended fiscal 2024 in line with the long-term expectations. We expect this trend to have been maintained throughout the to-be-reported quarter.

Dental

On May 31, 2024, STERIS completed selling its Dental segment to Peak Rock Capital for $787.5 million. It will receive up to an additional $12.5 million in contingent payments, payable if the Dental business achieves certain revenue targets in fiscal year 2025. The proceeds will be primarily used to repay debt. For the fiscal first quarter, the company is expected to report one month of sales from the Dental business.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has a higher chance of beating estimates, which is not the case here.

Earnings ESP: STERIS has an Earnings ESP of 0.00%.

Zacks Rank: The company currently carries a Zacks Rank #2.

Stocks Worth a Look

Here are some medical stocks worth considering, as these have the right combination of elements to post an earnings beat this reporting cycle.

Hims & Hers Health HIMS has an Earnings ESP of +19.28% and a Zacks Rank #2 at present.

The company is set to release second-quarter 2024 results on Aug 5.

HIMS' earnings surpassed estimates in three of the trailing four quarters and missed the same once, the average surprise being 79.17%. The Zacks Consensus Estimate for second-quarter EPS implies a surge of 266.7% from the year-ago quarter's reported figure.

TransMedics Group TMDX has an Earnings ESP of +23.54% and a Zacks Rank #3 at present. The company is set to release second-quarter 2024 results on Aug 1.

TransMedics has an expected sales growth rate of 15.78% for 2024. TMDX beat on earnings in two of the trailing four quarters and missed in the other two, the average surprise being 9.93%.

Tenet Healthcare THC has an Earnings ESP of +4.11% and a Zacks Rank #2 at present. The company is set to release second-quarter 2024 results on Jul 24.

THC has an expected long-term earnings growth rate of 12.5% compared to the industry's 11.9%. Its earnings surpassed estimates in each of the trailing four quarters, the average surprise being 56.50%.

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