Steris ((STE)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Steris plc showcased a robust financial performance, marked by significant revenue and earnings growth, record free cash flow, and improved margins across key segments. Despite facing challenges such as a decline in healthcare capital equipment revenue, tariff costs, and legal settlement impacts on cash flow, the overall sentiment remained positive, buoyed by the company’s strong financial results.
Revenue and Earnings Growth
Steris reported a 4% increase in total revenue, with constant currency organic revenue growing by 6% in the quarter. The company achieved an impressive 40% increase in adjusted earnings per diluted share from continuing operations, reaching $2.74, compared to the previous year.
Record Free Cash Flow
The company achieved a record free cash flow of $787 million for fiscal 2025, significantly surpassing the full-year guidance. This achievement was primarily driven by notable improvements in working capital.
Healthcare Segment Performance
The healthcare segment saw a 6% growth in constant currency organic revenue for the year, with margins improving to 25%. This improvement was attributed to increased volume, favorable pricing, and enhanced productivity.
AST Segment Growth
The AST segment experienced a 9% growth in constant currency organic revenue for the year, with services growing by 7%. This growth underscores the segment’s strong performance.
Improved Margins in Life Sciences
Life Sciences margins increased to 42.3%, a 360 basis point improvement. This was due to a favorable mix, strategic pricing, and the divestiture of the CECS business.
Healthcare Capital Equipment Revenue Decline
Despite a record year previously, healthcare capital equipment revenue declined by 5% for the year, highlighting a challenge in this segment.
Challenges in AST Margins
EBIT margins for the AST segment were slightly down year-over-year at 44.8%, due to energy and labor headwinds and a negative mix shift from capital equipment shipments.
Tariff Costs Impact
The fiscal 2026 outlook includes a $30 million impact from tariff costs, which is expected to affect the EPS range, presenting a challenge for Steris.
Legal Settlement Impact on Cash Flow
A $40 million legal settlement for ETO in FY 2026 is anticipated to negatively impact cash flow, adding to the financial challenges faced by the company.
Forward-Looking Guidance
Looking ahead to fiscal 2026, Steris expects revenue growth between 6% and 7%, with adjusted EPS anticipated to be in the range of $9.90 to $10.15, reflecting a 7% to 10% growth despite the $30 million tariff cost. The company aims to maintain its strong financial performance while navigating the outlined challenges.
In conclusion, Steris plc’s earnings call highlighted a strong financial performance with significant growth in revenue and earnings, record free cash flow, and improved margins in key segments. While challenges such as tariff costs and legal settlements pose concerns, the overall sentiment remains positive, driven by the company’s robust financial results and optimistic guidance for the future.