Steris stock rating upgraded by Morgan Stanley on sterilization trends

Investing.com - Morgan Stanley (NYSE:MS) upgraded STERIS (NYSE:STE) from Equalweight to Overweight on Tuesday, while raising its price target to $276.00 from $260.00. The company, currently trading at $229.87 with a market capitalization of $22.65 billion, shows promising valuation metrics according to InvestingPro data, with a notably low PEG ratio of 0.58.

The upgrade reflects Morgan Stanley’s increased confidence in STERIS following additional analysis of the company’s ethylene oxide operations and recent industry developments.

Morgan Stanley cited ongoing NESHAP-driven consolidation in the sterilization industry and continuing in-shoring and outsourcing trends as key factors supporting the rating change.

The firm’s research on electron-beam technology, along with developments in endoscopy disruptions, contributed to the more positive outlook for the medical equipment and supplies company.

Morgan Stanley also highlighted LSTDx funding tailwinds as an additional factor that prompted the firm to take a more bullish stance on STERIS shares.

In other recent news, STERIS Corp . reported a strong performance for the fourth quarter of fiscal year 2025, surpassing earnings expectations with an earnings per share (EPS) of $2.74, exceeding the forecasted $2.60. Revenue for the quarter met expectations at $1.48 billion, marking a 4% increase year-over-year. Additionally, STERIS secured a $450 million contract extension from the U.S. Department of Defense for medical gear, extending the agreement through June 2030. Analyst David Turkaly from Citizens JMP raised the price target for STERIS stock to $280, citing a slight revenue beat and a 12% increase in earnings per share year-over-year. Meanwhile, Jefferies initiated coverage on STERIS with a Hold rating and a $263 price target, noting potential headwinds from healthcare policy changes. Despite these concerns, Jefferies projects an 8% revenue growth for fiscal year 2026, slightly above the consensus. STERIS also reported a record free cash flow of $787 million for fiscal 2025, highlighting its operational efficiency and strategic execution. The company’s ability to navigate challenges such as rising input costs and the divestiture of its dental segment was noted as a key strength.

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