STE Q1 Earnings Beat, Revenues Miss, Stock Dips in Aftermarket Trading

Revenues rose 7.3% to $1.49 billion but missed the consensus mark by 0.83%. Constant-currency organic revenues increased 6.2%, while total backlog advanced 7.7% year over year to $553.9 million. 

Following the earnings announcement, STE stock fell 2.4% in after-market trading yesterday. The decline was likely due to investor concerns over the company’s modest top-line miss.

STERIS Posts Broad Segment Gains

Healthcare revenues increased 7.6% to $1.05 billion. Service revenues grew 9.6%, consumables revenues advanced 9.2% and capital equipment revenues rose 1.4%. Constant-currency organic growth was 6.4%. Healthcare operating income increased 10.5% to $260.2 million. The improvement reflected higher volume, pricing, productivity and favorable mix, partly offset by inflation and increased tariff costs. The segment’s backlog rose 10% to $444 million. 

AST revenues rose 5.8% to $297.6 million, driven by 6% service growth despite a 13% decline in capital equipment revenues. Segment operating income increased 4.5% to $142.9 million, as improved pricing was partly offset by higher depreciation and labor costs.

Life Sciences revenues climbed 8.6% to $146.7 million. Capital equipment revenues rose 17%, consumables increased 8% and service revenues grew 2%. Operating income advanced 5.3% to $61.8 million, aided by improved pricing and volume but restrained by inflation and lower productivity. 

STE Expands Adjusted Profitability

Gross profit increased to $684.2 million from $628 million in the prior-year quarter. Gross margin expanded 69 basis points (bps) year over year to 45.8%, despite a 6% increase in cost of revenues.

Selling, general and administrative expenses increased 4.5% to $369.7 million, while research and development expenses rose 8.3% to $28.6 million. Total operating expenses increased 4.3% to $398.3 million. Adjusted income from operations advanced 12% to $354.8 million and the adjusted operating margin expanded 99 bps to 23.8%.

STERIS Builds Cash and Financial Flexibility

Cash and cash equivalents increased to $482.3 million as of June 30, 2026, from $439.6 million as of March 31, 2026. Long-term indebtedness declined to $1.65 billion from $1.81 billion.

Cumulative cash flow from operating activities totaled $367.1 million compared with $420 million a year ago. The company also repurchased $115.5 million of ordinary shares and paid $61.4 million in dividends during the quarter. 

STE Reaffirms Fiscal 2027 Outlook

STERIS reiterated fiscal 2027 as-reported revenue growth guidance of 7-8%. Constant-currency organic revenue growth is still expected in the range of 6-7%. The Zacks Consensus Estimate is pegged at $6.37 billion, implying 7.4% growth from fiscal 2025.

Adjusted earnings per share are projected to be between $11.10 and $11.30.  The Zacks Consensus Estimate for the metric is pegged at $11.17.

Our Take 

STERIS ended first-quarter fiscal 2027 with mixed results, with earnings beating estimates but revenues missing the same. However, the expansion of both the margins looks encouraging. 

The quarter reflected stable demand across its Healthcare segment. Share gains in consumables and services have fueled the performance, underpinned by solid order growth for capital equipment. Meanwhile, management flagged tariffs and inflation as notable offsets.

STE’s Zacks Rank & Key Picks 

STE currently carries a Zacks Rank #3 (Hold). 

Some better-ranked stocks from the broader medical space are Intuitive Surgical ISRG, Quest Diagnostics DGX and Medpace MEDP.

Intuitive Surgical, carrying a Zacks Rank #2 (Buy) at present, reported second-quarter 2026 adjusted EPS of $2.80, which surpassed the Zacks Consensus Estimate by 12.9%. Revenues of $2.89 billion beat the Zacks Consensus Estimate by 3.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ISRG has an earnings yield of 3.1% compared to the industry’s negative 3% yield. The company beat earnings estimates in each of the trailing four quarters, the average surprise being 16.53%.

Quest Diagnostics, carrying a Zacks Rank #2 at present, posted second-quarter 2026 adjusted EPS of $3.12, which outpaced the Zacks Consensus Estimate by 11%. Revenues of $3.04 billion topped the Zacks Consensus Estimate by 2.1%.

DGX has an earnings yield of 4.7%, almost in line with the industry’s yield. The company’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 5.77%.

Medpace, carrying a Zacks Rank #2 at present, posted second-quarter 2026 adjusted EPS of $4.25, which beat the Zacks Consensus Estimate by 4.17%. Revenues of $707.3 million outperformed the consensus mark by 1.12%.

MEDP has a historical five-year earnings growth rate of 30.5% compared with the industry’s 5.6% growth. In the trailing four quarters, the company delivered an average earnings beat of 10.16%.

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