Piper Sandler raises STERIS stock price target to $265

On Monday, Piper Sandler analyst Jason Bednar increased the price target for STERIS (NYSE:STE) to $265 from $260, while maintaining an Overweight rating on the company’s shares. Currently trading at $220.65, InvestingPro analysis suggests STERIS is trading below its Fair Value, with strong financial health metrics earning a GREAT rating. Bednar highlighted the strong performance of STERIS’s Healthcare (HC) franchise and anticipated better results from the Applied Sterilization Technologies (AST) division on a comparable basis.

Despite potential limitations on reported revenue and earnings per share (EPS) due to foreign exchange (Fx) fluctuations in the fourth calendar quarter, Bednar expects STERIS to slightly exceed EPS estimates. With earnings due in just 2 days and revenue growth of 15.75% over the last twelve months, investors are watching closely. He predicts that management will tighten its EPS guidance by about ten cents, a common practice in the fiscal third-quarter update. The analyst also suggests that the current fiscal year 2026 estimates may need a slight downward revision due to the Fx impact.

Bednar’s outlook for STERIS is optimistic, citing improvements in the company’s ownership case over the past few months. These improvements are attributed to both company-specific factors, such as reduced Ethylene Oxide (EO) risk and expected growth in AST, and external factors, including the company’s attractive valuation compared to the S&P 500 and the medtech index.

The price target adjustment to $265 is a result of rolling forward one quarter in the valuation methodology used by Piper Sandler. While the stock trades at a high P/E multiple of 50.65, it has historically demonstrated low price volatility. Bednar’s commentary indicates confidence in STERIS’s ongoing performance and its potential for growth in the upcoming fiscal year.

In other recent news, STERIS plc has reported a 7% increase in total revenue for the second quarter of fiscal year 2025, along with a 15% rise in adjusted earnings per share to $2.14. Despite these positive developments, the company experienced margin pressures, resulting in a decrease in gross margin to 43.7% and EBIT margin to 22.2%. The company’s net income from continuing operations was reported at $212.2 million.

Capital expenditures for the first half of fiscal 2025 were $210 million, while free cash flow stood at $344.5 million. STERIS plc’s total debt was reported at $2.2 billion, with a debt-to-EBITDA ratio of approximately 1.5x. The company’s Healthcare revenue increased by 7%, AST segment revenue grew by 9%, and Life Sciences revenue rose by 3%.

Looking ahead, STERIS plc anticipates 6% to 7% constant currency organic revenue growth for the full year, with adjusted earnings per diluted share expected to be between $9.05 and $9.25. Despite some challenges, the company remains optimistic about maintaining margins and achieving growth in its diversified portfolio.

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