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STERIS plc - $STE - Earnings Analysis: Strong recurring revenue streams in Healthcare and AST segments.

By sagebytes —

Business Model

STERIS generates revenue through products and services that support patient care with an emphasis on infection prevention. Their revenue streams are segmented into Healthcare, Applied Sterilization Technologies (AST), and Life Sciences.

Revenue Sources

  • Healthcare: Consumables, service, and capital equipment for hospitals and healthcare facilities.
  • AST: Sterilization services and capital equipment for medical device and pharmaceutical companies.
  • Life Sciences: Products and services for biopharmaceutical and research facilities, including consumables, equipment, and services.

Income Statement Analysis

  • Revenue increased by 6% year-over-year, driven by volume and price increases (240 basis points).
  • Gross margin improved by 90 basis points to 44.6%, due to positive price and productivity offsetting labor inflation.
  • EBIT margin decreased slightly by 10 basis points to 23.3% due to litigation expenses and increased healthcare benefit costs.
  • Adjusted earnings per diluted share increased by 11% to $2.32, supported by lower interest expense following the divestiture of the Dental segment.

Balance Sheet Analysis

  • Cash and cash equivalents decreased from March 31, 2024 to December 31, 2024.
  • Total assets decreased from March 31, 2024 to December 31, 2024.
  • Total equity increased from March 31, 2024 to December 31, 2024.
  • Total Liabilities decreased from March 31, 2024 to December 31, 2024.

Cash Flow Analysis

  • Net cash provided by operating activities increased, driven by improved working capital.
  • Increased proceeds from the sale of businesses and strategic investments.

Capital Allocation

STERIS is focused on investing in organic growth, strategic acquisitions, and returning value to shareholders through dividends and share repurchases. The company expects capital expenditures of approximately $360 million for fiscal 2025.

Management Commentary

We are pleased with our results through the first nine months of the fiscal year.

We are updating our outlook primarily to reflect a significant shift in foreign currency based on forward rates through March 31, 2025.

Orders grew over 10% in the third quarter, which is reflected in the $435,000,000 healthcare backlog.

Overall Sentiment: Positive, with some caution related to currency impacts and the timing of capital equipment shipments.

Recommendation

Rating: Hold

Reason for Rating: STERIS shows consistent revenue growth and profitability, but currency headwinds and potential project delays create uncertainty.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/7/2025, 4:22:16 AM