Key Takeaways:
STERIS plc (NYSE: STE) reported fourth-quarter adjusted earnings of $2.83 per share and revenue of $1.59 billion, narrowly missing analyst expectations and sending shares down in late trading.
"Fiscal 2026 was another record year for STERIS, with 9% revenue growth," CEO Daniel Carestio said in the earnings call. "We are pleased to have translated this into 10% adjusted earnings per share growth despite the 80 basis points of impact from tariffs on margins."
The medical products maker’s revenue missed the Zacks Consensus Estimate by 0.5%, while adjusted EPS was 0.9% below the forecast. Despite the miss, revenue grew 7.3% from the prior-year quarter, driven by steady procedure-driven demand.
Shares of STERIS fell 0.9% in after-hours trading on Tuesday. The company guided for fiscal 2027 adjusted EPS between $11.10 and $11.30, implying 9% to 11% growth, which is ahead of the current Zacks Consensus Estimate of $10.21. As-reported revenue is projected to grow 7% to 8%.
All of STERIS's business segments posted year-over-year growth. The Healthcare division, its largest, saw revenue climb 7% to $1.14 billion. The Life Sciences segment grew 9% to $162.9 million, and Applied Sterilization Technologies (AST) revenue increased 6% to $289.2 million. Management noted that U.S. procedure volume continues to grow in the mid-single digits, supporting demand.
While the company’s gross margin expanded by 57 basis points to 43.9%, its adjusted operating margin contracted by 61 basis points to 24.2%. Executives attributed the pressure to inflation and approximately $10 million in incremental tariffs during the quarter.
Looking ahead, STERIS announced a new $1 billion share repurchase authorization, signaling a more consistent capital return strategy. The company expects to buy back $200 million to $300 million in shares annually.
"The reality is that we understand going forward that doing some level of consistent buyback is important for the health of our company," Carestio told analysts.
The company also detailed plans to invest approximately $60 million over two years to build a new state-of-the-art sterility assurance manufacturing facility in Mentor, Ohio. This move is intended to consolidate existing U.S. production and support long-term growth in a high-margin business.
The mixed quarterly results stand in contrast to some better-ranked peers in the medical space, such as Intuitive Surgical (ISRG) and Phibro Animal Health (PAHC), which both recently posted significant earnings beats, according to Zacks Investment Research.
The slight earnings miss overshadowed an otherwise solid year of growth, but the strong fiscal 2027 guidance suggests management is confident in sustained demand. Investors will watch the first-quarter 2027 earnings call in August for confirmation that the company can achieve its margin expansion and growth targets despite inflationary pressures.
This article is for informational purposes only and does not constitute investment advice.
