STERIS Q1 Earnings Call Highlights

STERIS delivered a strong fiscal 2027 first quarter, with reported revenue up 7%, constant-currency organic growth of 6% and adjusted EPS up 11% to $2.59. Gross and EBIT margins also expanded despite inflation and tariff costs. Healthcare led segment performance, driven by 10% services growth and 9% consumables growth, while endoscopy and ambulatory surgery activity remained robust. AST and Life Sciences posted organic growth of 5% and 8%, respectively, though both faced margin pressure. The company is investing $600 million in a North Carolina chemistry complex that is expected to consolidate operations and generate more than a 10% return on invested capital within three to five years. STERIS maintained its fiscal 2027 revenue and EPS outlook and raised its quarterly dividend by $0.06 to $0.69.

STERIS NYSE: STE reported first-quarter fiscal 2027 revenue growth and higher earnings, while maintaining its full-year outlook and outlining a $600 million investment in a new chemistry manufacturing, research and distribution complex in North Carolina. Total reported revenue increased 7% from the prior-year quarter, while constant-currency organic revenue rose 6%, driven by volume growth and 190 basis points of pricing, Chief Financial Officer Karen Burton said. Adjusted diluted earnings per share increased 11% to $2.59, and adjusted net income totaled $253.4 million.

Gross margin rose 70 basis points year over year to 46%, supported by pricing and productivity improvements that were partly offset by inflation. EBIT margin increased 100 basis points to 23.8% of revenue, aided by gross-margin gains, favorable currency and operating-cost discipline. The company recorded $14 million in gross tariff costs during the quarter, excluding refunds, compared with $12 million a year earlier. STERIS received $4 million in tariff refunds, resulting in a $2 million year-over-year benefit from net tariffs, Burton said. The refunds were recorded in corporate results rather than allocated to operating segments.

Healthcare segment constant-currency organic revenue grew 6% in the quarter. Services revenue increased 10%, while consumables revenue rose 9%, benefiting from higher customer consumption, share gains and procedure growth in endoscopy, President and CEO Dan Carestio said. Healthcare capital equipment revenue rose 1%, with growth affected by shipment timing. However, capital equipment orders increased 4%, and ending backlog rose to $444 million. Carestio said the company expects solid full-year growth in the capital equipment business, citing market traction and the effect of prior capital sales on demand for related consumables, chemistry products, sterility assurance and services. Healthcare EBIT margin expanded 60 basis points to 24.8%. Volume, pricing, productivity and favorable mix were partly offset by inflation, business investments and tariffs.

During the question-and-answer session, Carestio said the company had not seen a slowdown in hospital procedure activity affecting its business, highlighting particularly strong growth in ambulatory surgery centers and endoscopy. He said STERIS has about one-third of its Healthcare franchise tied to endoscopy-related activity. Carestio attributed elevated endoscopy activity in part to a greater focus on earlier detection and screening for colon cancer. He said the company was encouraged by current growth but could not say whether the higher level would be sustained.

Applied Sterilization Technologies, or AST, posted 5% constant-currency organic revenue growth, including 6% growth in services. Carestio said service volumes remained light as custo...