Is it the Right Time to Hold STERIS Stock in Your Portfolio?

STERIS plc’s STE Healthcare business continues to benefit from robust U.S. procedure volumes, favorable pricing and market share gains. Service revenues fuel the Applied Sterilization Technologies (“AST”) segment’s growth. Meanwhile, macroeconomic challenges and adverse currency impacts appear concerning for STE’s operations. 

In the past year, shares of this Zacks Rank #3 (Hold) company have risen 7.7% against the industry’s 13.4% decline. The S&P 500 composite has risen 12.1% in the same time frame. 

The renowned provider of infection prevention and other procedural products and services has a market capitalization of $24.61 billion. The company has an earnings yield of 4% compared to the industry’s -2.5%. In the trailing four quarters, STE delivered an average earnings surprise of 2.05%. 

Let’s delve deeper.

Tailwinds for STERIS

Promising 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, as well as favorable pricing and market share gains. For the fiscal fourth quarter, Healthcare reported revenue growth of 5% year over year. 

This outperformance reflected a 6% improvement in consumable revenues and 13% growth in service revenues, with both segments posting strong organic revenue growth. Healthcare achieved 6% constant currency organic revenue growth for the fiscal fourth quarter. Order growth was robust, with more than 12% growth in the fiscal fourth quarter. Margins improved, primarily driven by increasing volume, favorable pricing and positive productivity that offset labor inflation. 

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 over 50 contract sterilization and laboratory facilities. STERIS, particularly, is gaining success with ethylene oxide (EO) sterilization.

In the fiscal fourth quarter, the AST division experienced 9% growth year over year. This performance was driven by a 6% increase in service revenues. Constant currency organic revenues were in the high single digits. STERIS experienced its first signs of increased bioprocessing demand. Meanwhile, global demand from MedTech customers remained stable. 

Headwinds for 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 affect its financial position, results of operation and competitive position. In line with this, in the fiscal third quarter, the company experienced an unfavorable impact of currency rate changes, which affected both revenues and profit.

Macroeconomic Problems: The current macroeconomic environment across the globe has adversely impacted STERIS’ financial operations. Increases in prices or decreases in the availability of raw materials and oil and gas have also historically impaired STERIS’ procurement of necessary materials for product manufacture, leading to an increase in production costs. Additionally, economic and market volatility has been affecting the investment portfolio of STERIS’ legacy defined benefit pension plan. This lingering macroeconomic softness might hamper the company’s growth. 

These macroeconomic factors are also resulting in a significant escalation in the company’s operating expenses. STERIS witnessed an 8% year-over-year rise in selling, general and administrative (SG&A) expenses in the fiscal fourth quarter.

STE Stock Estimate Trend

In the past 30 days, the Zacks Consensus Estimate for STERIS’ fiscal 2026 earnings has moved north 0.5% to $9.98.

The Zacks Consensus Estimate for fiscal 2026 revenues is pegged at $5.81 billion, which suggests a modest 6.3% rise from the fiscal 2025 reported number.

Key Picks

Some better-ranked stocks in the broader medical space that have announced quarterly results are Integer Holdings Corporation ITGR, AngioDynamics ANGO and CVS Health Corporation CVS.

Integer Holdings has a long-term estimated growth rate of 18.4%. ITGR’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 2.8%. Its shares have surged 1.1% compared to the industry’s 13.4% decline over the past year.

ITGR currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AngioDynamics, currently sporting a Zacks Rank #1, has an estimated fiscal 2026 earnings growth rate of 27.8% compared with the S&P 500 composite’s 10.5% growth. The company surpassed earnings estimates in each of the trailing four quarters, the average surprise being 70.9%. Shares of the company have rallied 63.9% against the industry’s 13.4% decline.

CVS Health, carrying a Zacks Rank of 2 (Buy) at present, has a long-term estimated growth rate of 11.4%. CVS’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 18.1%. Shares of the company have rallied 11.1% against the industry’s 19.4% decline.

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

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