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On Thursday, Jefferies research firm began coverage on STERIS shares (NYSE:STE), issuing a Hold rating and establishing a price target of $263.00. The stock, currently trading near its 52-week high of $252.79, appears fairly valued according to InvestingPro analysis. STERIS, a provider of infection prevention and other procedural products and services, is facing a period of uncertainty due to potential shifts in healthcare policies that could disrupt the industry.
The analysis by Jefferies points to the risk of over 14 million Medicaid and Health Insurance Exchange (HIX) individuals losing their coverage, which could lead to a multi-percentage volume decline for the company. Despite these concerns, STERIS maintains strong financial health with a "GREAT" overall score from InvestingPro, supported by moderate debt levels and consistent dividend payments for 21 consecutive years. This anticipated loss of coverage is expected to create headwinds for STERIS’s business in the coming years. Additionally, the Life Sciences sector, which is a significant part of STERIS’s portfolio, may encounter challenges, especially with expected pressures in research and development spending.
Despite these concerns, Jefferies forecasts a revenue growth of 8% for the fiscal year 2026, which includes a 110 basis points tailwind from foreign exchange movements. This projection is slightly more optimistic than the consensus, which anticipates a 6% increase. However, for fiscal year 2027, Jefferies’s projection is more conservative, with an expected growth of 3%, compared to the consensus estimate of 6%.
The Hold rating reflects the analyst’s view that while STERIS has a resilient business model, the potential changes in healthcare policies and the resulting economic and political uncertainty make it difficult to be more positive about the stock’s outlook at this time. The $263 price target suggests that Jefferies sees limited upside potential for the stock from its current level.
In other recent news, STERIS reported strong financial results for the fourth quarter of fiscal year 2025, exceeding earnings expectations. The company posted an earnings per share (EPS) of $2.74, surpassing the forecasted $2.60, while revenue met expectations at $1.48 billion. STERIS’s annual performance also showed a 6% year-over-year sales growth and a notable 12% increase in earnings per share. Analyst David Turkaly from Citizens JMP raised the company’s stock target price to $280, reflecting confidence in STERIS’s solid performance and market position.
STERIS’s achievements were attributed to effective execution in pricing, product mix, and productivity improvements, despite challenges such as rising input costs and the divestiture of its dental segment. The company also reported a record free cash flow of $787 million for the fiscal year. Looking ahead, STERIS anticipates revenue growth of 6-7% for fiscal year 2026, with an EPS guidance range of $9.90 to $10.15. The company plans to capture $20 million in restructuring cost savings and manage $30 million in anticipated tariff costs.
CEO Dan Carrestio emphasized STERIS’s resilience and strategic positioning, noting the company’s diversified business model allowed it to deliver results in line with its outlook. The company remains focused on maintaining strong margins and leveraging its strengths to offset potential tariff impacts. These developments highlight STERIS’s ongoing ability to navigate market challenges and capitalize on growth opportunities.
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