Steris Earnings Call Highlights Robust Growth and Optimism

Steris ((STE)) has held its Q2 earnings call. Read on for the main highlights of the call.

The recent earnings call for Steris plc painted a picture of robust financial health, marked by impressive growth in revenue, margins, and earnings per share. Despite some concerns about tariffs, inflation, and tax rates, the overall sentiment remained optimistic, buoyed by positive developments across various segments and an enhanced outlook for fiscal 2026.

Strong Revenue Growth

Steris reported a 10% year-over-year increase in total as-reported revenue, with a 9% rise in constant currency organic revenue. This growth was primarily driven by improvements in volume and pricing, showcasing the company’s ability to capitalize on market opportunities effectively.

Improved Gross and EBIT Margins

The company achieved a 60 basis point increase in gross margin, reaching 44.3%, and a 90 basis point improvement in EBIT margin, now at 23.1%. These enhancements were attributed to positive pricing strategies, productivity gains, and effective operating expense management.

Significant Growth in Earnings Per Share

Steris reported a 15% increase in adjusted earnings per diluted share from continuing operations, amounting to $2.47. This significant growth underscores the company’s strong financial performance and strategic execution.

Strong Performance in AST Services

The AST segment experienced a 7% growth in constant currency organic revenue, with services growing by 13%. This was driven by stable medical device volumes and increased demand in bioprocessing, highlighting the segment’s resilience and growth potential.

Healthcare Segment Success

The healthcare segment saw a 9% growth in constant currency organic revenue, with service and consumables growing by 13% and 10%, respectively. EBIT margins in this segment increased by 100 basis points, reflecting strong operational performance.

Impact of Tariffs and Inflation

Tariffs and inflation posed challenges, impacting margins with a 90 basis point effect from tariffs and a 130 basis point impact from material and labor inflation. These factors highlight the external pressures faced by the company.

Decline in AST Capital Equipment Revenue

Despite overall growth in services, the AST segment experienced declines in capital equipment revenue, pointing to potential areas for improvement in this segment.

Increased Effective Tax Rate

The adjusted effective tax rate rose to 24.5%, driven by changes in discrete item adjustments and geographic mix, indicating a shift in the company’s tax landscape.

Positive Outlook for Fiscal 2026

Looking ahead, Steris has increased its outlook for fiscal 2026, expecting 8% to 9% as-reported revenue growth. The company has also raised its free cash flow outlook by $30 million to $850 million, signaling confidence in its future financial trajectory.

In conclusion, Steris plc’s latest earnings call reflects a strong financial performance with significant growth across key metrics. While external challenges such as tariffs and inflation persist, the company’s strategic initiatives and positive outlook for fiscal 2026 provide a foundation for continued success.