STERIS plc STE has been gaining investor confidence on consistently positive results. Over the past year, the company has gained 34.6% against its industry’s 2.8% decline. Also, the company has outperformed the S&P 500’s 12.5% gain.
This developer, manufacturer and marketer of infection prevention, decontamination, microbial reduction, and surgical and gastrointestinal support products and services has a market cap of $8.80 billion. The company’s long-term historical earnings growth rate of 12.2% is higher than the S&P 500’s 4.4%.
With solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment.
The company’s estimate revision trend for the current year has been positive. In the past 60 days, one analyst revised estimates upward with no movement in the opposite direction. However, earnings estimates remained flat at $4.71.
Let’s find out whether the latest trend is a sustainable one.
Solid Quarterly Performance
STERIS exited fourth-quarter fiscal 2018 with better-than-expected earnings and revenues. We are also encouraged by the favorable underlying market trend along with new product and service offerings. The company's strong organic growth across specialty services, life sciences and applied sterilization segments also buoys optimism.
Synergy Health Consolidation on Track
STERIS’ acquisition of U.K.-based outsourced sterilization services provider Synergy Health plc has continued to remain a significant move by the company as it combines STERIS' Infection Prevention and Services businesses with Synergy Health's Hospital Sterilization Services. Earlier, management said that it expects to save at least $45 million by the end of fiscal 2019, with the balance divided evenly into the next two fiscals. The company also anticipates about $10 million of cost synergies this year from the Synergy Health transaction and another $10 million next fiscal.
Strategic Buyouts and Divestments
Over the recent past, STERIS has been looking to expand in adjacent markets through acquisitions and dilutions. Following the Synergy Health buyout, the company sold the Synergy Health Healthcare Consumable Solutions (HCS) business to Vernacare in November 2017.
This apart, the company made six acquisitions in fiscal 2018. Through these, the company aims to strengthen the Healthcare Products, Healthcare Specialty Services and the Applied Sterilization Technologies businesses.
Solid Balance Sheet Position
STERIS exited fiscal 2018 with cash and cash equivalents of $201.5 million compared with $282.9 million at the end of fiscal 2017. The company had long-term debt of $1.32 billion at the end of the fourth-quarter fiscal 2018 compared with $1.48 billion a year ago.
Other Key Picks
A few other top-ranked stocks in the broader medical sector are Intuitive Surgical ISRG, Illumina, Inc ILMN and Amedisys, Inc. AMED. While Intuitive Surgical and Illumina sport a Zacks Rank #1 (Strong Buy), Amedisys carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical has an expected long-term earnings growth rate of 12.1%.
Illumina expects long-term earnings growth of 20%.
Amedisys has an expected long-term earnings growth rate of 17.5%.
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