Here's Why You Should Add STERIS (STE) To Portfolio Now

STERIS plc (NYSE:STE) has been progressing well with its growth strategies of diversifying its product portfolio and pursuing acquisitions.

This $12.77-billion worth infection prevention and microbial reduction company’s earnings growth rate is expected to be 9.5% for the next 12 months. Also, the company has a trailing four-quarter positive earnings surprise of 5.5%, on average.

In the past year, the company’s shares have outperformed the industry. The stock has rallied 42.1% compared with the industry’s 17.7% growth.

Let’s delve deeper into the factors that substantiate the company’s Zacks Rank #2 (Buy).

STERIS' Infection Prevention and Sterilization Wing Prospers Globally: With the acquisition of U.K.-based outsourced sterilization services provider Synergy Health, STERIS has become the new global leader in infection prevention and sterilization. The company is currently providing improved healthcare services to medical device companies, pharma companies, hospitals and other healthcare facilities across the globe. The consolidation, since its inception, has boosted STERIS' presence in the international markets by combining STERIS’ strong presence in North America with Synergy's solid footprint across Europe. The company continues to benefit from the acquisition of Synergy Health.

High Potential in Healthcare and Pharmaceutical Industries: The bulk of STERIS’ sales are generated from healthcare and pharmaceutical industries. During the second quarter of fiscal 2020, revenues at the Healthcare Specialty Services segment rose 8% year over year. The segment witnessed improved demand and robust growth on consumables, services and capital equipment. The completion of several tuck-in acquisitions has also strengthened this segment. Given the continued success achieved by the company in offering varied medical equipment to its customers, we believe this segment should continue to drive growth for the company in the long term.

Upbeat Guidance: The company has raised its projection for fiscal 2020 adjusted earnings in the range of $5.50-5.65 from the earlier estimate of $5.38-5.53.Constant currency organic revenue growth for fiscal 2020 is expected in the range of 7.5-8.5% compared with the prior projection of 6-7%. This overall bullish trend is likely to continue through the rest of the fiscal 2020.

Which Way Are Estimates Treading?

For the third quarter of fiscal 2020, the Zacks Consensus Estimate is pegged at $1.43, calling for 13.5% growth from the prior-year reported number. The same for revenues is pegged at $749.7 million, calling for 7.7% growth from the year-earlier reported number.

The Zacks Consensus Estimate for fiscal 2020 earnings is pegged at $5.58 per share, suggesting a 14.1% rise from the year-ago quarter’s reported figure. The same for revenues stands at $2.99 billion, implying a 7.4% improvement from the year-earlier quarter’s reported number.

Stocks Worth a Look

A few other top-ranked stocks from the broader medical space are Haemonetics Corporation (NYSE:HAE) , West Pharmaceutical Services (NYSE:WST) and Omnicell (NASDAQ:OMCL) . While Haemonetics sports a Zacks Rank #1 (Strong Buy), the other two carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Haemonetics has a projected long-term earnings growth rate of 13.5%.

West Pharmaceutical Services has an expected long-term earnings growth rate of 14%.

Omnicell has a long-term earnings growth rate of 12.5%.

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