Exchange: NYSE | Sector: Healthcare | Industry: Medical Devices
Q4 2025
Published: May 29, 2025
Earnings Highlights
Revenue of $1.48B up 4.3% year-over-year
EPS of $1.48 increased by 10% from previous year
Gross margin of 48.1%
Net income of 145.67M
"We anticipate as reported revenue from continuing operations to grow 6% to 7% in fiscal 2026. Constant currency organic revenue growth is also expected to grow 6% to 7%. Included in this outlook is approximately 200 basis points of price." - Dan Carestio, President & CEO
STERIS plc (STE) QQ4 2025 Earnings Analysis: Resilient Q4 Performance, Margin Expansion, and 2026 Growth Outlook in a Tariff-Adjusted Landscape
Executive Summary
STERIS reported a solid fourth quarter of fiscal 2025, delivering 4% year-over-year revenue growth (4% reported, 6% constant currency organic growth) and meaningful margin expansion driven by volume, price/m mix, and productivity. The quarter featured a double-digit lift in net income per share on a continuing-operations basis (EPS $2.74, up 40% YoY) aided by deleveraging and the divestiture of the Dental segment. For the full year, STE posted 6% revenue growth and 12% earnings growth, underpinned by recurring consumables/services strength in Healthcare and robust Life Sciences consumables, with Healthcare capital equipment facing a tougher year but remaining supported by a healthy order backlog.
Looking into fiscal 2026, management guides 6-7% revenue growth from continuing operations with a similar cadence in constant currency organic growth and an estimated $30 million tariff impact embedded in guidance. Margin resilience is expected to persist, with an approximate 20 basis point uplift in EBIT margins at the high end of the guidance if tariff offsets are achieved. The company also signaled ongoing capital allocation discipline, including potential M&A if the right opportunity arises, while maintaining a strong balance sheet (net debt close to zero, EBITDA around 1.4x at Q4). The combination of high-velocity consumables, expanding service capabilities, and a backlog-rich capital equipment cycle positions STERIS to sustain mid-single to low-double-digit earnings growth in 2026, albeit with tariff and macro headwinds to monitor.
Key Performance Indicators
Revenue
1.48B
QoQ: 8.02% | YoY:4.31%
Gross Profit
712.12M
48.10% margin
QoQ: 16.68% | YoY:22.19%
Operating Income
216.15M
QoQ: -11.88% | YoY:-12.27%
Net Income
145.67M
QoQ: -16.06% | YoY:10 678.79%
EPS
1.48
QoQ: -15.43% | YoY:10 747.48%
Revenue Trend
Margin Analysis
Key Insights
Revenue: 1.4805 billion in Q4 2025, up 4% YoY; 6% implied growth in constant currency organic revenues for the quarter (YoY and CC figures per management).
Gross Profit: 712.12 million; gross margin 48.1% (GAAP) for the quarter, up from prior-year levels by about 170 basis points in the reported period; management commentary attributes gains to favorable mix, price, and productivity against labor inflation.
Operating Income: 216.15 million; operating margin approximately 14.6% (EBIT margin reported at 24.8% in the quarter in the call, with non-GAAP adjustments noted by management).
Net Income: 145.67 million; EPS (diluted) 1.48; YoY and QoQ variations reflect ongoing benefits from the Dental divestiture leveraging lower interest expense and accounting for one-time discrete items.
EBITDA: 216.15 million; EBITDA margin of about 14.6%.
Financial Highlights
- Revenue: 1.4805 billion in Q4 2025, up 4% YoY; 6% implied growth in constant currency organic revenues for the quarter (YoY and CC figures per management).
- Gross Profit: 712.12 million; gross margin 48.1% (GAAP) for the quarter, up from prior-year levels by about 170 basis points in the reported period; management commentary attributes gains to favorable mix, price, and productivity against labor inflation.
- Operating Income: 216.15 million; operating margin approximately 14.6% (EBIT margin reported at 24.8% in the quarter in the call, with non-GAAP adjustments noted by management).
- Net Income: 145.67 million; EPS (diluted) 1.48; YoY and QoQ variations reflect ongoing benefits from the Dental divestiture leveraging lower interest expense and accounting for one-time discrete items.
- EBITDA: 216.15 million; EBITDA margin of about 14.6%.
- Cash Flow and Liquidity: Operating cash flow 263.10 million; free cash flow 192.21 million; capex 70.89 million; cash balance 171.70 million; total debt 1.25 billion; net debt about negative 46.7 million (net cash), yielding a net leverage around 1.4x at quarter-end.
- Backlog and mix: Healthcare segment delivered continued strength in consumables and services; Capital equipment revenue declined ~5% for the year but orders grew >12%, indicating a solid backlog position entering FY2026. Life Sciences and AST delivered meaningful growth in services and recurring revenues, with AST services growth in the high single digits to mid single digits forecast in 2026.
- Guidance and tariffs: Fiscal 2026 revenue is guided to +6%-7% (constant currency), with roughly +200 bps of price baked in; the company assumes about $30 million in tariff costs for 2026 (split roughly half from China-related tariffs and half from global tariffs). EPS growth projected at 7%-10% including tariffs.
- Capital allocation: Share repurchases paused at quarter-end, with approximately $200 million of buybacks occurred in fiscal 2025; management notes potential further buybacks to offset dilution, but with debt levels in check and a focus on deleveraging and growth investments.
- Management tone: The leadership emphasized resilience through a diversified portfolio, strong recurring revenue streams, and a structurally favorable mix, while acknowledging tariff headwinds and the need to monitor onshoring dynamics and bioprocessing demand in Life Sciences and AST.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.48B
4.31%
8.02%
Gross Profit
712.12M
22.19%
16.68%
Operating Income
216.15M
-12.27%
-11.88%
Net Income
145.67M
10 678.79%
-16.06%
EPS
1.48
10 747.48%
-15.43%
Key Financial Ratios
currentRatio
1.96
grossProfitMargin
48.1%
operatingProfitMargin
14.6%
netProfitMargin
9.84%
returnOnAssets
1.44%
returnOnEquity
2.2%
debtEquityRatio
0.02
operatingCashFlowPerShare
$2.68
freeCashFlowPerShare
$1.96
dividendPayoutRatio
38.4%
priceToBookRatio
3.37
priceEarningsRatio
38.23
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Theme: Near-term performance drivers and confidence in 2026 trajectory
- Quote: Dan Carestio, President & CEO, on 2026 outlook: “We anticipate as reported revenue from continuing operations to grow 6% to 7% in fiscal 2026. Constant currency organic revenue growth is also expected to grow 6% to 7%. Included in this outlook is approximately 200 basis points of price.†(Q4 2025 prepared remarks)
- Theme: Segment dynamics and backlog
- Quote: “Healthcare constant currency organic revenue grew 6% for the year, led by strong recurring revenue streams… consumables and services continues to be driven by procedure volumes in the U.S. as well as price and market share gains.†(Dan Carestio during call)
- Theme: Capital equipment versus services mix
- Quote: “Capital equipment revenue declined 5% for the year against our record year last year. Capital equipment orders grew over 12% for the full year as underlying demand remained strong.†(Dan Carestio)
- Theme: Tariffs and guidance specifics
- Quote: “The fiscal 2026 outlook of $9.90 to $10.15 includes $30 million of tariff costs.†(Mike Tokich)
- Theme: Margin outlook and offsetting factors
- Quote: “For the high end of our earnings range, we would expect EBIT margins to increase approximately 20 basis points, reflecting our ability to offset tariffs.†(Dan Carestio)
- Theme: Cash flow and restructuring benefits
- Quote: “We’re going to benefit from about $20 million of restructuring cost savings that will be in FY ’26.†(Mike Tokich)
- Theme: M&A and capital allocation stance
- Quote: “If the right opportunity presents itself, we’ll be involved.†(Dan Carestio)
- Theme: Tariffs as a net impact and mitigation approach
- Quote: “The $30 million is a net number… we expect to offset some of our exposure by leveraging the strength of STERIS.†(Mike Tokich and Dan Carestio)
We anticipate as reported revenue from continuing operations to grow 6% to 7% in fiscal 2026. Constant currency organic revenue growth is also expected to grow 6% to 7%. Included in this outlook is approximately 200 basis points of price.
— Dan Carestio, President & CEO
The fiscal 2026 outlook of $9.90 to $10.15 includes $30 million of tariff costs. The EPS range implies 7% to 10% growth in earnings, including tariffs, which is impressive performance.
— Mike Tokich, Chief Financial Officer
Forward Guidance
STERIS delivered a steady, defensible growth framework for fiscal 2026 anchored in recurring revenue expansion, a diversified mix across Healthcare, Applied Sterilization Technologies (AST), and Life Sciences, and a margin profile supported by price, mix, and productivity gains. The core takeaways and risk considerations are:
- Revenue and earnings trajectory: The company guides 6-7% revenue growth (continuing operations) for FY2026, with flat-to-low-capacity for currency effects, and approximately 200 bps of price contribution included in the outlook. EPS growth of 7-10% is implied, even after tariff costs embedded in the guide. This sets a high floor given stabilization in services and consumables, as well as a recovery in Life Sciences capital equipment demand tilting toward a backlog-driven shipments cycle in FY2026.
- Tariff exposure and mitigation: A $30 million tariff headwind is embedded in the FY2026 outlook. The company expects to mitigate some portion of this through restructuring savings, favorable vendor positioning, and manufacturing-location shifts, while acknowledging that the timing of tariff mitigation may push some benefits toward the back half of the year. Investors should monitor tariff policy developments and the company’s execution on supplier diversification and nearshoring strategies.
- Segment specifics and operating leverage: Healthcare remains the primary engine with 6-7% CC revenue growth and continued margin expansion (Healthcare margins near 25% for the year, per management). AST shows strong services growth offset by capital equipment headwinds; Life Sciences delivered solid consumables/services momentum with a back-half uplift in orders. The overall margin trajectory is supported by price, productivity gains, and ongoing cost discipline, with potential 20bp EBIT margin uplift if tariffs are offset.
- Balance sheet and cash flow: The firm sustains a conservative balance sheet with net debt near zero and an EBITDA multiple around 1.4x at year-end. Free cash flow generation remains robust (FY25 free cash flow of $787 million, record level) and supports continued deleveraging and potential M&A activity when accretive opportunities arise. Investors should track working capital dynamics and the impact of ETO settlements (see below) on cash flows in FY2026.
- Key risks to monitor: Tariff policy evolution and global trade tensions; potential volatility in Life Sciences bioprocessing demand; changes in hospital capital expenditure cycles; regulatory delays affecting equipment installations; and macro-driven shifts in procedure volumes that could influence the pace of backlog conversion.
- Bottom line: Given a diversified, resilient portfolio, strong free cash flow, and a measured tariff-inclusive guidance, the market should view STERIS as a quality, defense-oriented growth name within Healthcare devices. The core risk is tariff exposure and the pace at which Life Sciences capital equipment markets reaccelerate, but the company’s mix shift toward recurring consumables/services supports earnings durability.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
STE Focus
48.10%
14.60%
2.20%
38.23%
OFIX
67.00%
-5.32%
-5.79%
-5.80%
NUVA
72.30%
6.14%
-4.62%
-18.48%
GKOS
72.90%
-27.20%
-4.38%
-62.05%
HSKA
40.90%
1.64%
-0.13%
-840.97%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
STERIC's QQ4 2025 results reinforce a resilient, diversified healthcare play with meaningful earnings visibility and strong cash-generation capabilities. The company’s organic growth framework (6-7% revenue growth in FY2026, with roughly 200 bps of pricing) is achievable given a backlog-loaded capital equipment cycle in Healthcare and persistent strength in consumables/services. Tariffs represent a material but manageable headwind; management expects to mitigate some impact via restructuring and vendor strategy, with an estimated $30 million tariff cost baked into FY2026 EBITDA/EPS targets. The Life Sciences segment remains a key growth driver through consumables and services, though bioprocessing demand remains spotty. A disciplined capital allocation approach—balancing organic growth investment, potential accretive M&A, debt reduction, and opportunistic buybacks—supports a constructive long-term view. Investors should monitor tariff developments, the pace of Life Sciences recovery, and the cadence of capital equipment orders into fiscal 2026. Overall, STERIS trades at elevated multiples reflecting its defensible growth profile, but offers attractive FCF generation and a scalable, diversified platform that should sustain mid-single to high-single-digit earnings growth through 2026.
Key Investment Factors
Growth Potential
- Recurring revenue strength in Healthcare (consumables, services) bodes well for durable top-line growth and earnings resilience.
- Backlog-rich capital equipment cycle in Healthcare and improving Life Sciences services trajectory could deliver mid-single-digit top-line growth and mid-to-high single-digit service growth in 2026, supporting margin expansion through operating leverage.
Profitability Risk
- Tariff exposure remains a material headwind ($30 million in FY2026 guidance); sensitivity to policy shifts.
- Bioprocessing demand in Life Sciences can be lumpy; mixed performance in AST and capital equipment remans a swing factor.
- Ongoing regulatory complexities could delay implementation projects or new equipment cycles.
Financial Position
- Strong liquidity with net cash position and EBITDA around 1.4x at year-end; ample capacity for capex and selective acquisitions.
- Free cash flow generation remains robust (FY25 FCF of $787 million) supporting shareholder returns and deleveraging potential.
SWOT Analysis
Strengths
Diversified, global platform with strong Healthcare recurring revenue (consumables and services)
Backlog-backed capital equipment demand in Healthcare
Margin improvement driven by pricing, mix, and productivity
Strong free cash flow generation and net debt near zero
Resilient business model aided by divestiture-driven focus (Dental divestiture) leading to lower interest expense
Weaknesses
Tariff exposure and macro sensitivity, particularly in Life Sciences and bioprocessing markets
Capital equipment cyclicality, especially in AST and Life Sciences during pharmaceutical cycles
Relatively modest dividend yield and potential for capital allocation to shift toward growth investments rather than returns
Opportunities
Upside from US onshoring and local manufacturing shifts increasing domestic volumes
Life Sciences consumables and services expansion; potential cross-sell across segments
Strategic M&A opportunities aligned with core sterile processing and infection prevention capabilities
Efficiency gains from restructuring and supply chain optimization to offset tariffs
Threats
Tariffs and trade policy volatility impacting input costs and pricing
Regulatory delays or shifts affecting capital equipment installations
Bioprocessing market volatility in Life Sciences and energy/labor headwinds in AST