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STERIS Poised on Synergy Health Addition amid Currency Woes

Zacks Equity Research

On Sep 8, we issued an updated research report on OH-based STERIS plc STE – a manufacturer and marketer of infection prevention, decontamination, microbial reduction, along with surgical and gastrointestinal support products and services. The company currently carries a Zacks Rank #3 (Hold).

On the bright side, Synergy Health – the company STERIS acquired last year − was one of the primary contributors to the strong double-digit revenue growth observed by the combined company. Management expects Synergy to contribute between $640–$650 million in fiscal 2017 which translates into low-single-digit sales growth.

STERIS has always been on track with its strategy of acquisitions for growth. In Jul 2016, the company bought Medisafe Holdings, which is a U.K.-based manufacturer of washer disinfector equipment and also markets related consumables and services. Per management, Medisafe’s products and services complement STERIS’ global healthcare offering by providing washer R&D and production in the U.K.

However, currency has been a major obstacle to STERIS' growth for quite some time. During first-quarter fiscal 2017, currency fluctuations affected STERIS’ revenues by 40 basis points. Additionally, the company’s lowered revenue guidance for fiscal 2017 was disappointing.

Moreover, the current macroeconomic turmoil in countries of the Middle East, owing to fluctuating oil prices, affected STERIS’ top line in the first quarter. Similar macroeconomic challenges were also witnessed across Latin America, Venezuela and Brazil.

Stocks to Consider      

Some better-ranked stocks in the medical instrument space are IDEXX Laboratories, Inc. IDXX, Masimo Corporation MASI and CryoLife Inc. CRY. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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