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STERIS plc (NYSE:STE) defied analyst predictions to release its quarterly results, which were ahead of market expectations. Results were good overall, with revenues beating analyst predictions by 5.1% to hit US$756m. Statutory earnings per share (EPS) came in at US$1.23, some 9.6% above whatthe analysts had expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on STERIS after the latest results.
Taking into account the latest results, STERIS' five analysts currently expect revenues in 2021 to be US$3.05b, approximately in line with the last 12 months. Per-share earnings are expected to increase 2.4% to US$5.09. In the lead-up to this report, the analysts had been modelling revenues of US$3.05b and earnings per share (EPS) of US$5.09 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
With the analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 11% to US$194. It looks as though they previously had some doubts over whether the business would live up to their expectations. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic STERIS analyst has a price target of US$200 per share, while the most pessimistic values it at US$175. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that STERIS' revenue growth is expected to slow, with forecast 1.0% increase next year well below the historical 6.8%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 10% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than STERIS.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that STERIS' revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for STERIS going out to 2023, and you can see them free on our platform here.
Before you take the next step you should know about the 1 warning sign for STERIS that we have uncovered.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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