Steris ((STE)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The latest earnings call from Steris presented a generally positive outlook, marked by strong revenue growth, improved margins, and significant free cash flow. Despite facing challenges such as increased tariff and employee healthcare costs, the company’s ongoing robust performance and strategic initiatives suggest a positive trajectory for the future.
Strong Revenue Growth
Steris reported a 9% increase in total revenue, with constant currency organic revenue growth at 8%. This growth was primarily driven by volume and a 230 basis points increase in price, showcasing the company’s ability to expand its market presence effectively.
Improvements in Margins
The company achieved a gross margin increase of 20 basis points to 45.3%, while the EBIT margin rose by 50 basis points to 22.8%. These improvements indicate Steris’s operational efficiency and its capacity to manage costs effectively.
Significant Earnings Per Share Growth
Steris saw a 15% improvement in adjusted earnings per diluted share from continuing operations, reaching $2.34. This growth underscores the company’s strong financial performance and its ability to deliver value to shareholders.
Strong Free Cash Flow
The first quarter saw Steris generating $327 million in free cash flow, driven by increased earnings and improvements in working capital. This robust cash flow positions the company well for future investments and shareholder returns.
Dividend Increase
In a move that highlights its commitment to returning value to shareholders, Steris announced a 10% increase in its dividend, marking the 20th consecutive year of dividend growth.
Healthcare Segment Growth
The healthcare segment showed an 8% growth in constant currency organic revenue, with capital equipment revenue rising by 6% and service revenue by 13%. This growth reflects the strong demand for Steris’s healthcare solutions.
AST Segment Performance
The AST segment experienced a 10% increase in constant currency organic revenue, with a 12% growth in services, indicating a strong performance in this area.
Life Sciences Backlog Increase
The Life Sciences group reported a backlog increase of over 50%, signaling strong future demand and potential for continued growth in this segment.
Increased Tariff Costs
Steris faced a $15 million increase in tariff costs over the last quarter due to changes in metal tariffs and EU policies, posing a challenge to its cost management strategies.
Unchanged Earnings Outlook Despite Strong Quarter
Despite a strong start to the fiscal year, Steris maintained its earnings outlook, reflecting a cautious approach amidst external economic uncertainties.
Increased Employee Healthcare Costs
Higher utilization of employee healthcare benefits led to increased costs, surpassing low single-digit premium increases, which could impact future profitability.
Forward-Looking Guidance
Steris provided detailed guidance for the fiscal year, projecting a 9% growth in total revenue and maintaining its earnings guidance at $9.90 to $10.15 per share. The company anticipates constant currency organic revenue growth of 6% to 7% for fiscal 2026, despite challenges from currency shifts and increased tariff costs. The full-year free cash flow outlook has been increased to $820 million, reflecting confidence in its financial strategy.
In summary, Steris’s earnings call conveyed a positive sentiment, with strong revenue growth and improved margins. While challenges such as increased tariff and healthcare costs were noted, the company’s strategic initiatives and robust financial performance suggest a promising outlook for the future.