STERIS (STE) Set to Post Q2 Earnings: What's in the Cards?
STERIS plc STE is set to release second-quarter fiscal 2024 numbers on Nov 7 after the closing bell.
The company posted adjusted earnings per share (EPS) of $2.00 in the last reported quarter, which beat the Zacks Consensus Estimate by 7.5%. STERIS beat earnings estimates in two of the trailing four quarters and missed the same in two, posting a negative earnings surprise of 1.25% on average.
Let’s look at how things have shaped up before this announcement.
Factors at Play
Healthcare
The Healthcare arm of STERIS is likely to have generated strong organic revenues in the second quarter of fiscal 2024, as witnessed during the previous quarter’s months. The performance is expected to have witnessed growth in capital equipment and an improvement in consumables and service revenues.
With an improved supply chain environment, coupled with STE’s ability to reduce lead times, it is likely to register strong capital equipment shipments. Per the fiscal first-quarter update, hospital capital spending remains robust, as evidenced by the healthcare backlog, totaling almost $500 million at the end of the quarter despite strong shipments. We expect these trends to continue through the fiscal second quarter, leading to top-line growth.
Our model projects the segment’s revenues for the fiscal second quarter to improve 8.9% year over year to $797.7 million.
Applied Sterilization Technologies (AST)
Similar to the last reported quarter, the performance of this segment is likely to be driven by solid underlying demand from core medical device customers. With the steady recovery of procedure volumes in markets across the United States, we anticipate stronger growth in the AST segment in the to-be-reported quarters.
STERIS plc Price and EPS Surprise
STERIS plc price-eps-surprise | STERIS plc Quote
We expect the reduced demand for single-use bioprocessing disposables is likely to follow in second-quarter fiscal 2024 as well.
Per our model, the projected revenues of the AST segment for the fiscal second quarter is pegged at $239.4 million, which suggests an increase of 3% year over year.
Life Sciences
In second-quarter fiscal 2024, we expect the Life Science segment to have benefited from an improvement in consumable revenues, capital equipment revenues and service revenues. The company had a record quarter of capital shipments last time due to the execution of a delayed capital shipment of about $10 million.
On the consumable side, STERIS had a strong finish in fiscal 2023, having worked through supply-chain challenges, including more normalized shipping to the Asia Pacific. Growth in service revenues for the year was backed by solid performance, equipment maintenance and the installation of new capital equipment. We believe the company is likely to have benefitted from all these trends in the fiscal second quarter.
Our model projects the segment’s revenues for the fiscal second quarter to rise 10.3% year over year to $138.7 million.
At the end of fiscal 2023, Life Science’s capital equipment backlog remained at just more than $100 million. While we expect the company to return to the normal cadence of shipments in the latter part of fiscal 2024, they may not have fully materialized in the fiscal second quarter.
Dental
We expect the Dental business is likely to post lower or flat organic revenues in the fiscal second quarter of 2024, similar to the last reported one. On the first quarter’s earnings call, management noted that it is witnessing patient volumes to improve for the first time post-COVID. We believe this improving scenario will benefit the company in the fiscal second quarter.
Per our model, the projected revenues of the Dental segment for the fiscal second quarter is pegged at $107.9 million, indicating a year-over-year decline of 1.5%.
Q2 Estimates
The Zacks Consensus Estimate for STERIS’ second quarter fiscal 2024 revenues is pegged at $1.29 billion. This suggests an increase of 7.3% from the year-ago reported figure.
The Zacks Consensus Estimate for its second-quarter fiscal 2024 EPS of $2.05 indicates a year-over-year rise of 3%.
What Our Model Suggests
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has a higher chance of beating estimates, which is not the case here.
Earnings ESP: STERIS has an Earnings ESP of -0.49%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3.
Stocks Worth a Look
Here are some medical stocks worth considering, as these have the right combination of elements to post an earnings beat this quarter.
Insulet PODD has an Earnings ESP of +6.61% and a Zacks Rank #2. The company will release third-quarter 2023 results on Nov 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Insulet has a long-term expected earnings growth rate of 35.7%. PODD has an earnings yield of 1.13% against the industry’s -2.58%.
Acadia Pharmaceuticals ACAD has an Earnings ESP of +6.76% and a Zacks Rank #2. The company is scheduled to release third-quarter 2023 results on Nov 2.
ACAD has an expected long-term earnings growth rate of 43.4%. In the trailing four quarters, the company delivered an average earnings surprise of 20.33%.
Medpace MEDP currently has an Earnings ESP of +2.29% and a Zacks Rank #2. The company recently released its third-quarter 2023 results on Oct 23.
Medpace has an expected earnings growth rate of 17.9% for the next year. MEDP’s earnings beat estimates in all the trailing four quarters, the average surprise being 14.62%.
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