STERIS raises fiscal 2027 profit forecast on tariff refunds

STERIS (STE) raised its adjusted earnings forecast for fiscal 2027 in results released on Nov. 4, after second-quarter revenue rose 9% from a year earlier. The company said it now expects adjusted EPS of $11.35 to $11.55 for the year, up from the $11.10 to $11.30 range it gave on Aug. 5.

The company said the revised outlook includes about $0.18 per diluted share from tariff refunds received so far this year. Its revenue growth expectations were unchanged, at 7% to 8% as reported and 6% to 7% in constant currency organic terms.

STERIS is a global provider of products and services that support patient care, with an emphasis on infection prevention. The company's press release covered the quarter ended Sept. 30.

Here's how the company did:

• Revenue: $1.59 billion vs. $1.46 billion a year earlier
• Adjusted EPS: $2.94 vs. $2.47 a year earlier
• As-reported diluted EPS: $2.19 vs. $1.94 a year earlier
• Net income attributable to shareholders: $213.7 million vs. $191.9 million a year earlier

Constant currency organic revenue growth was 8% in the quarter. On an as-reported basis, tariff refunds added about $20 million to pre-tax results, while gross tariff costs were flat with the prior year at $15 million.

"We are pleased with our second quarter performance," said President and CEO Dan Carestio. "Life Sciences delivered particularly strong performance in the quarter, giving us confidence to raise our expectations for the segment for the full year."

2027 outlook

The company raised its adjusted EPS range and revised growth expectations for two of its three segments. Healthcare was unchanged.

The company said its fiscal 2027 free cash flow forecast is about $800 million, based on operating cash flow of $1.25 billion and purchases of property, plant, equipment and intangibles of $450 million. It will provide a revised fiscal 2027 outlook that includes the proposed Xodus Medical acquisition after closing.

Segment results

Healthcare revenue rose 9% as reported to $1.12 billion from $1.03 billion a year earlier. Segment operating income was $269.2 million, compared with $259.5 million.

Applied Sterilization Technologies revenue rose 5% to $295.6 million from $281.5 million. Capital equipment revenue fell 21%, while segment operating income was $132.1 million, compared with $127.6 million.

Life Sciences revenue rose 18% to $170.6 million from $145.0 million. Capital equipment revenue increased 53%, and segment operating income was $75.8 million, compared with $59.9 million.

Restructuring charges

The company approved a separate targeted restructuring plan during the quarter, in addition to the plan announced on Aug. 5. It covers facility realignment, product rationalization and organizational changes, primarily in Healthcare.

The company expects total charges of about $45 million, including about $10 million in cash and $35 million in non-cash charges. About $25 million of the charges fall in the second quarter, and the plan is expected to generate annualized savings of about $9 million.

Cash flow and capital returns

Net cash from operations for the first six months of fiscal 2027 was $656.1 million, compared with $707.8 million a year earlier. Free cash flow was $492.5 million, compared with $527.7 million. The company said the decline was driven mainly by a much smaller contribution from working capital.

Repurchases of ordinary shares totaled $215.9 million in the first six months, compared with $111.1 million a year earlier.