STE Beats on Q1 Earnings and Revenues, Raises '26 Sales View

STERIS plc STE reported first-quarter fiscal 2026 adjusted earnings per share (EPS) of $2.34, up 15.3% from the year-ago quarter’s figure. The figure surpassed the Zacks Consensus Estimate by 0.9%.

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 $1.79, up 27% from the year-ago level of $1.41.

Following the earnings announcement, STE stock remained unchanged in after-market trading yesterday.

STE’s Q1 Revenues in Detail

Revenues of $1.39 billion from continuing operations increased 8.6% year over year. The figure missed the Zacks Consensus Estimate by 2.4%.

Organic revenues at constant exchange rate or CER rose 8% year over year.

STE’s Quarterly Performance in Detail

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

Revenues at Healthcare rose 8% year over year to $974.7 million (up 8% on a CER organic basis). This reflected 5% growth in consumable revenues, a 13% rise in service revenues and a 6% improvement in capital equipment revenues. Our model expected Healthcare segment revenues to improve 5.2% in the fiscal first quarter.

Revenues from AST improved 13% to $281.2 million (up 10% on a CER organic basis). This performance reflected 12% growth in service revenues and a 46% increase in capital equipment revenues. Our model anticipated a 6.3% improvement in the segment’s quarterly revenues.

Revenues from the Life Sciences segment increased 5% to $135.2 million (up 4% year over year on a CER organic basis). This performance reflected 8% growth in consumable revenues, a 3% rise in service revenues and a 1% improvement in capital equipment revenues. Our model projected a year-over-year increase of 6% for the segment’s revenues.

Margins

The gross profit in the reported quarter was $628 million, up 9.7% from the prior-year level. The gross margin expanded 41 basis points (bps) year over year to 45.1% despite a 7.9% increase in the cost of revenues.

STERIS witnessed a 5.4% year-over-year rise in selling, general and administrative expenses. The figure amounted to $353.8 million. Research and development expenses rose 3.1% to $26.4 million. Adjusted operating expenses totaled $380.2 million, up 5.3% year over year. The adjusted operating margin expanded 131 bps to 17.8%.

Financial Details

STERIS exited the first quarter of fiscal 2026 with cash and cash equivalents of $279.7 million compared with $171.7 million at the end of fiscal 2025.

STERIS plc Price, Consensus and EPS Surprise

Net cash flow from operating activities at the end of the fiscal first quarter was $420 million compared with $303.7 million in the year-ago period. Further, the company has a five-year annualized dividend growth rate of 9.03%.

Guidance

STERIS raised its fiscal 2026 revenue projection.

It now expects revenues from continuing operations to increase approximately 8-9%, up from the previous projection of 6-7%. The Zacks Consensus Estimate is pegged at $5.83 billion, implying 6.8% growth from fiscal 2025.

Constant currency organic revenues are 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 $10.12.

Our Take

STERIS ended first-quarter fiscal 2026 on a solid note, wherein both earnings and revenues beat estimates. All business segments experienced growth during the quarter. The year-over-year top-line growth can be attributed to favorable foreign currency. Meanwhile, expansion of both margins, despite tariff headwinds, bodes well for the stock.

Furthermore, the raised sales guidance for fiscal 2026 looks encouraging.

STE’s Zacks Rank & Key Picks

STE currently carries a Zacks Rank #3 (Buy).

Some better-ranked stocks from the broader medical space are Boston Scientific BSX, Cardinal Health CAH and Cencora COR.

Boston Scientific, carrying a Zacks Rank #2 (Buy) at present, reported a second-quarter 2025 adjusted EPS of 75 cents, which beat the Zacks Consensus Estimate by 4.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Revenues of $5.06 billion topped the Zacks Consensus Estimate by 2.3%. BSX has a long-term earnings growth rate of 14% compared with the industry’s 14.2%.

Cardinal Health, carrying a Zacks Rank #2 at present, posted third-quarter fiscal 2025 adjusted EPS of $2.35, which exceeded the Zacks Consensus Estimate by 9.3%. Revenues of $54.88 billion missed the Zacks Consensus Estimate by 0.3%.

CAH has an estimated long-term earnings growth rate of 10.9% compared with the industry’s 9.9%.

Cencora currently carries a Zacks Rank #2. The Zacks Consensus Estimate for third-quarter fiscal 2025 adjusted EPS is currently pegged at $3.78 and the same for revenues is pinned at $80.33 billion.

Cencora has an estimated long-term growth rate of 12.8%. COR’s earnings yield of 5.4% compares favorably with the industry’s 4.1%. 

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This article originally published on Zacks Investment Research (zacks.com).

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