Should You Hold STERIS Stock in Your Portfolio for Now?

STERIS plc’s STE service revenues are driving growth in its Applied Sterilization Technologies (“AST”). The Healthcare segment is gaining from the successful market adoption of its comprehensive offerings, including infection prevention consumables and capital equipment. Meanwhile, macroeconomic volatilities and adverse currency fluctuations raise concerns for STERIS stock.

In the past year, shares of this Zacks Rank #3 (Hold) company have risen 26.2% compared with the industry’s 4.2% growth and the S&P 500 composite’s 18.5% rise.

The renowned provider of infection prevention and other procedural products and services has a market capitalization of $21.75 billion. The company has an earnings yield of 3.9% compared with the industry’s negative 4.9%. In the trailing four quarters, STE delivered an average earnings surprise of 2.21%.

Let’s delve deeper.

STE: Factors at Play

Strong 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, particularly, is gaining success with ethylene oxide sterilization. Its customers in this business are mostly the manufacturers of single-use, sterile technologies that are used in aseptic manufacturing of vaccines and biopharmaceuticals.

In the fiscal second quarter, the AST division experienced 10% growth year over year. This was driven by a 13% increase in service revenues. Constant currency organic revenues were in the high single digits. The growth can be attributed to currency, bioprocessing demand and stable medical device volumes. 

Promising Healthcare Business: The Healthcare segment is gaining from the successful market adoption of its comprehensive offerings, including infection prevention consumables and capital equipment. Further, its services to maintain that equipment, repair reusable procedural instruments and outsource instrument reprocessing services are gaining traction. Over the past few quarters, the segment’s organic growth has been driven by the continuous procedure volume growth in the United States and favorable pricing and market share gains.

For the fiscal second quarter, Healthcare reported revenue growth of 9% year over year (up 9% on a CER organic basis). This outperformance indicated 10% growth in consumable revenues and 4% growth in capital equipment revenues. Service revenues continued their streak of outperformance with a 13% year-over-year increase. Order growth was robust, with more than 3% growth year to date. Margins improved, primarily driven by increasing volume, favorable pricing, positive productivity and restructuring program benefits offsetting tariffs and inflation.

What Concerns STERIS?

Foreign Currency Risks: With nearly 30% of the company’s revenues and costs of revenues being generated outside the United States, foreign currency exchange rate fluctuations can significantly impact its financial position, results of operations and competitive position. For most operations, local currencies have been determined to be the functional currencies. As an instance, the ongoing geopolitical instability, such as Russia’s invasion of Ukraine, has negatively impacted the global and U.S. economies, leading to supply-chain disruptions, rising interest rates, volatility in capital markets and foreign currency exchange rates and heightened cybersecurity risks.

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Macroeconomic Problems: The current macroeconomic environment across the globe has adversely affected STERIS’ financial operations. These macroeconomic factors are also resulting in a significant escalation in the company’s operating expenses. STERIS witnessed a 6.2% year-over-year rise in selling, general and administrative expenses in the fiscal second quarter. Research and development expenses rose 4.4%, giving a hint about the company’s positive investments in innovations. However, if the increased expenses do not lead to the development of competitive products or services, there could be a risk of declining demand for STERIS’ offerings, which may hurt profitability. 

STE Stock Estimate Trend

In the past 30 days, the Zacks Consensus Estimate for STERIS’ fiscal 2026 earnings per share (EPS) indicates a 1.5% improvement at $10.22. 

The Zacks Consensus Estimate for fiscal 2026 revenues is pegged at $5.93 billion, which implies 8.6% growth from the fiscal 2025 reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Globus Medical GMED, Boston Scientific BSX and Medtronic MDT. While Globus Medical sports a Zacks Rank #1 (Strong Buy), Boston Scientific and Medtronic carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Estimates for Globus Medical’s EPS have increased 11.8% in the past 30 days. Shares of the company have risen 8.5% in the past year compared with the industry’s growth of 1.1%. GMED’s earnings surpassed estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 16.2%. In the last reported quarter, it delivered an earnings surprise of 49.4%. 

Boston Scientific’s shares have jumped 12.3% in the past year. Estimates for the company’s 2025 EPS have increased 1 cent to $3.04 in the past 30 days. BSX’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 7.4%. In the last reported quarter, it posted an earnings surprise of 5.6%.

Estimates for MDT’s fiscal 2026 EPS of $5.65 have increased 0.5% in the past 30 days. Shares of the company have rallied 21.7% in the past year against the industry’s 0.1% decline. MDT’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 2.7%. In the last reported quarter, it delivered an earnings surprise of 3.8%.

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

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