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STERIS (STE) to Report Q2 Earnings: What's in the Cards?

Strong gains from the recent Cantel Medical buyout as well as the addition of a new Dental arm are expected to have contributed STERIS' (STE) Q2 performance.

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This story originally appeared on Zacks

STERIS plc STE is expected to report second-quarter fiscal 2022 results on Nov 2, after market close.

- Zacks

In the last-reported quarter, the company’s earnings per share (EPS) of $1.76 beat the Zacks Consensus Estimate by 17.3%. Moreover, its earnings surpassed the consensus estimate in three of the trailing four quarters and missed in one. The average earnings surprise was 9.54%.

Let's see how things have shaped up prior to the announcement.

Factors At Play

The Healthcare arm has been witnessing faster-than-expected recovery in customer demand since the fiscal first quarter, with its Key Surgical and Cantel Medical businesses contributing about 70% to consumable revenues.

In the previously-reported quarter’s earnings call, the company noted that it has taken several strategic decisions to increase the integration synergy of the Cantel acquisition (completed in early June). These decisions include utilizing the talent and expertise of the Cantel sales organization and creation of a dedicated sales channel focused solely on endoscope reprocessing. The company expected these decisions to impact the way it approaches the market with a customer-first mentality. This should have positively contributed to the company’s fiscal second-quarter sales.

STERIS plc Price and EPS Surprise

STERIS plc Price and EPS Surprise

STERIS plc price-eps-surprise | STERIS plc Quote

The company also noted by combining STERIS, Key Surgical and Cantel, it has made significant progress in realigning its European Healthcare business. We expect this to be reflected in STERIS’ to-be-reported quarter’s results. Further, the Healthcare segment is expected to gain from a record capital backlog at the end of the fiscal first quarter with surgical and infection prevention strength.

The Zacks Consensus Estimate for Healthcare revenues is pegged at $727 million, suggesting a surge of 54.4% from the year-ago quarter’s reported figure.

The Applied Sterilization Technologies (AST) arm is also likely to gain from increased demand from medical device customers in the fiscal second quarter, as it did in the previous quarter. The company expects this arm to remain strong as its core medical device customers continue to benefit from the rebound in procedures and rebuilding of some inventory. In addition, demand for COVID-related products and vaccines as well as bioprocess manufacturing disposables is anticipated to remain robust, benefitting the AST arm.

The Zacks Consensus Estimate for AST revenues is pegged at $195 million, suggesting a rise of 15% from the year-ago quarter’s reported figure.

The Life Sciences segment, similar to the prior quarter, is likely to benefit from consistently growing capital equipment and service revenues. Notably, in the fiscal first quarter, this segment rose 3.9% on 8% growth in capital equipment revenues and 17% growth in service revenues.

The Zacks Consensus Estimate for Life Sciences revenues is pegged at $122 million, suggesting a rise of 5.4% from the year-ago quarter.

The company also introduced a new Dental segment in the fiscal first quarter and mapped the Cantel businesses to STERIS’ four reporting segments. Notably, the Dental arm generated $35.2 million in revenues in the fiscal first quarter, representing one month of financial performance. Based on this remarkable performance, we anticipate significant revenue growth in this arm in the to-be-reported quarter as well.

Q2 Estimates

The Zacks Consensus Estimate for second-quarter fiscal 2022 revenues is pegged at $1.16 billion, suggesting an improvement of 53.58% from the year-ago reported figure.

The Zacks Consensus Estimate for the company’s second-quarter fiscal 2022 EPS of $1.83 suggests a 23.65% uptick from the year-ago reported figure.

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 higher chances of beating estimates. However, this is not the case here as you can see:

Earnings ESP: The company has an Earnings ESP of 0.00%. 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 #2.

Stocks Worth a Look

Here are a few stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.

Horizon Therapeutics Public Limited Company HZNP has an Earnings ESP of +0.97% and a Zacks Rank of 2. The company will release third-quarter 2021 results on Nov 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Insulet Corporation PODD has an Earnings ESP of +15.79% and a Zacks Rank of 2. The company is scheduled to release third-quarter 2021 results on Nov 4.

Vertex Pharmaceuticals Incorporated VRTX has an Earnings ESP of +10.62% and a Zacks Rank of 2. The company will report third-quarter 2021 results on Nov 2.



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