What STERIS (STE) Said on Its Q2 Earnings Call

Key Points

• STERIS raised its fiscal 2027 EPS outlook to $11.35–$11.55 from $11.10–$11.30 after second-quarter revenue rose 9% to $1.6 billion and adjusted EPS climbed 19% to $2.94. The higher forecast includes about $0.18 per share from tariff refunds; full-year revenue growth guidance was unchanged.
• Life Sciences growth exceeded expectations: quarterly organic revenue rose 18%, prompting STERIS to lift its full-year segment growth forecast to 9%–10%. By contrast, it cut its Applied Sterilization Technologies forecast to 6%–7% from 7%–8%.
• STERIS expects its planned Xodus Medical acquisition to add revenue, margins and EPS, but will update guidance after closing. Separately, a restructuring is expected to incur $45 million in charges and generate about $9 million in annualized savings once fully implemented.

STERIS NYSE: STE raised its fiscal 2027 earnings outlook after reporting higher second-quarter revenue and profit, as tariff refunds helped expand margins and strong Life Sciences equipment shipments offset a slower start to the year in its sterilization business.

Revenue rose 9% to $1.6 billion in the quarter, while constant-currency organic revenue increased 8%, Senior Vice President and Chief Financial Officer Karen Burton said on the earnings call. Adjusted earnings per share increased 19% to $2.94 from $2.47 a year earlier.

The company now expects fiscal 2027 earnings per diluted share of $11.35 to $11.55, up from its previous forecast of $11.10 to $11.30. President and Chief Executive Officer Dan Carestio said the revised outlook includes an approximately $0.18-per-share benefit from tariff refunds received year to date. Second-quarter outperformance and lower interest costs also contributed to the increase.

STERIS maintained its full-year revenue growth forecast of 7% to 8% as reported and 6% to 7% on a constant-currency organic basis. The outlook excludes the planned acquisition of Xodus Medical, with updated expectations to follow the deal’s closing.

Tariff Refunds Boost Margins

Adjusted gross margin expanded by 100 basis points to 45.3%, with approximately $20 million in quarterly tariff refunds contributing 130 basis points of improvement, Burton said. Excluding that benefit, underlying gross margins declined slightly as inflation more than offset favorable pricing.

Adjusted earnings before interest and taxes margin rose 150 basis points to 24.6%, including a 130-basis-point contribution from the refunds. Adjusted earnings per diluted share grew 13% excluding the refunds.

Burton said STERIS does not expect material additional tariff refunds during the rest of fiscal 2027. The company has received $24 million in refunds year to date, she said, while approximately $3 million of the $27 million in IEEPA tariffs paid last year currently has no refund program available.

Free cash flow for the first six months declined to $492.5 million from $527.7 million a year earlier. Burton attributed the decrease primarily to lower working-capital contributions, including cash used to build inventory for second-half shipments, partly offset by higher net income.

Life Sciences Outlook Rises as AST Forecast Falls

Life Sciences constant-currency organic revenue increased 18% in the quarter, supported by 53% growth in capital equipment revenue. Carestio said manufacturing localization and reshoring were helping the business, while a shipment exceeding $10 million to a single customer also contributed to the quarter’s performance.

STERIS raised its full-year Life Sciences constant-currency organic growth forecast to 9% to 10% from 6% to 7%. Carestio said the outlook assumes more normalized growth in the second half after capital equipment led the first-half outperformance.

Healthcare constant-currency organic revenue rose 7% in the quarter. Service and consumables revenue each grew 10%, while capital equipment revenue increased 4%. Carestio cited share gains and growth in endoscopy procedures among the drivers of consumables demand.

In Applied Sterilization Technologies, or AST, constant-currency organic revenue rose 5%. STERIS lowered its full-year growth forecast for the segment to 6% to 7% from 7% to 8%.

Carestio said AST performance improved in September and October after a slow start to the fiscal year. He added that the company believes customer destocking ended during the second quarter and that easier year-over-year comparisons should support stronger growth in the second half.

Xodus Deal and Restructuring

STERIS expects its planned purchase of Xodus Medical to expand its consumables offering and give it a clinical sales presence in operating rooms. Xodus sells products for patient positioning, handling and transfer, warming and other operating-room uses, including its single-use Pink Pad positioning product.

Burton said the debt-funded acquisition is expected to add to revenue, margins and earnings per share. She did not provide an accretion estimate and said the company would update guidance after closing.

Separately, STERIS approved a restructuring plan involving facility realignment, product rationalization and organizational changes. The company expects $45 million in charges, including $10 million in cash expenditures, and approximately $9 million in annualized savings once fully implemented.

Burton said the actions include eliminating a single-use urology scope from the portfolio and consolidating some sites. A portion of the savings is expected in fiscal 2028, with the full benefit in subsequent years.

About STERIS (NYSE:STE)

STERIS plc NYSE: STE provides infection prevention and procedural products and services for healthcare, pharmaceutical, research, and other industries. Its offerings include sterilizers, washers and other equipment used to clean and sterilize medical devices and surgical instruments, as well as products for operating rooms and endoscopy procedures.

The company also provides equipment installation, maintenance, repair, and training, along with contract sterilization and laboratory testing services.

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