HomeMost PopularInvestingSTERIS (STE) Surpasses Revenue Estimates in Q2, Margins Decline: Financial Insights

STERIS (STE) Surpasses Revenue Estimates in Q2, Margins Decline: Financial Insights

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The second quarter financial results for STERIS plc (STE) have garnered attention as the company reported adjusted earnings per share (EPS) of $2.03, reflecting a 2% increase from the previous year’s quarter. Although this figure has surpassed the year-ago quarter, it fell short of the Zacks Consensus Estimate by 1%. Notably, these adjusted earnings exclude certain non-recurring charges such as the amortization of acquired intangible assets and acquisition and integration-related charges.

Revenue Breakdown

In the second quarter, STERIS reported revenues of $1.34 billion, exhibiting an 11.8% increase year over year. Impressively, this surpassed the Zacks Consensus Estimate by 4.1%. Furthermore, organic revenues at constant exchange rate (CER) rose by 8% year over year during this period.

Segment Performance

STERIS operates through four key segments, each showcasing distinctive performance in the fiscal second quarter.

Healthcare Segment:

The segment experienced an 18.7% increase in revenues to reach $870.1 million, with a 14% organic basis growth. Notably, this growth was driven by a substantial increase in capital equipment revenues, service revenues, and consumable revenues.

AST Segment:

Revenues for the Applied Sterilization Technologies segment improved by 1.2% to $235.1 million, though it saw a 1% decline on a CER organic basis.

Life Sciences Segment:

Revenues in the Life Sciences segment saw a 5.8% rise, reaching $133.1 million, with a 5% increase in CER organic basis. This growth was primarily driven by an increase in capital equipment revenues and consumable revenues.

Dental Segment:

In the Dental segment, reported revenues were $104.2 million, reflecting a 4.9% decrease year over year and a 6% decline on a CER organic basis.

Margin Analysis

Despite a notable increase in gross profit, which reached $593.5 million, the gross margin contracted by 13 basis points to 44.2% due to a rise in the cost of revenues. Additionally, the company witnessed a significant rise in selling, general, and administrative expenses, resulting in a contraction of the adjusted operating margin to 13.8%.

Financial Highlights and Future Outlook

The company concluded the second quarter with cash and cash equivalents of $213.8 million and cumulative net cash flow from operating activities at $427.2 million. STERIS also reaffirmed its fiscal 2024 guidance, maintaining the expectations of revenue growth and adjusted earnings per share for the year.

Expert Opinion and Market Insights

STERIS’ performance reflects a mixed sentiment, as it surpassed revenue estimates but missed on earnings. The company showcases an encouraging momentum in its Healthcare segment. However, the substantial rise in expenses and the decline in margins have raised concerns among investors.

Market Analysis and Key Picks

STERIS currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader medical space include DexCom (DXCM), Medpace (MEDP), and The Ensign Group (ENSG). Each of these companies has exhibited impressive financial results and holds promising growth prospects.

For detailed information and investment analysis, it is advisable to refer to Zacks Investment Research for the complete reports on these stocks and potential opportunities.

Editor: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any financial institution.

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