STERIS delivered 9% second-quarter revenue growth and lifted its fiscal 2027 adjusted EPS outlook, helped partly by tariff refunds. Life Sciences led the operating gains, while weaker cash flow and a new restructuring plan add important qualifications.
- US$1.6 billion quarterly revenue, up 9%
- Adjusted diluted EPS rose to US$2.94 from US$2.47
- Fiscal 2027 adjusted EPS outlook lifted to US$11.35-US$11.55
- Life Sciences revenue jumped 18% and operating income rose 27%
- Additional US$45 million restructuring plan targets US$9 million in annual savings
STERIS plc (NYSE:STE) raised its fiscal 2027 adjusted earnings outlook after second-quarter revenue climbed 9% to US$1.6 billion, with constant-currency organic growth of 8%. Adjusted diluted EPS increased to US$2.94 from US$2.47 a year earlier, although the upgraded full-year range includes about US$0.18 per share from tariff refunds received so far this fiscal year.
Life Sciences drives the strongest segment performance
The standout performance came from Life Sciences, where revenue rose 18% to US$170.6 million on a 53% increase in capital equipment revenue, alongside 9% growth in consumables and 5% growth in services. Segment operating income increased to US$75.8 million from US$59.9 million, with STERIS attributing the improvement to price, productivity, volume and favourable mix.
Healthcare, the largest division, grew revenue 9% to US$1.12 billion, led by 10% growth in both service and consumables revenue. Its operating income rose more modestly to US$269.2 million from US$259.5 million as higher volume and pricing were partly absorbed by inflation, lower productivity and investment. Applied Sterilization Technologies revenue increased 5% to US$295.6 million, while its capital equipment revenue fell 21%.
EPS guidance rises while tariff benefit clouds the comparison
STERIS now expects fiscal 2027 adjusted EPS of US$11.35 to US$11.55, up from US$11.10 to US$11.30. The company left its consolidated revenue growth outlook unchanged at 7% to 8% on a reported basis and 6% to 7% for constant-currency organic growth. It raised the Life Sciences organic growth forecast to 9% to 10%, while trimming the Applied Sterilization Technologies range to 6% to 7% from 7% to 8%.
The reported second-quarter result included an approximately US$20 million pre-tax benefit from tariff refunds, while gross tariff costs remained US$15 million, unchanged from the prior-year quarter. That makes the underlying operating performance important to parse: management described demand and execution as solid, but the higher earnings target is not entirely operational in origin.
Restructuring adds savings target and execution risk
STERIS also approved a separate targeted restructuring plan, mainly in Healthcare, covering facility realignment, product rationalisation and selected organisational changes. The plan is expected to cost about US$45 million, including US$10 million in cash spending and US$35 million in non-cash charges, with approximately US$25 million recognised in the second quarter. Annualised savings are estimated at about US$9 million, with some expected in fiscal 2028 and the full benefit in later years.
Cash generation was less impressive than the earnings line. Operating cash flow for the first six months fell to US$656.1 million from US$707.8 million, while free cash flow, a non-GAAP measure, declined to US$492.5 million from US$527.7 million. STERIS said the change was driven primarily by a much smaller working-capital contribution, partly offset by higher net income. The proposed Xodus Medical acquisition had not closed, and the company said it would update its fiscal outlook to include that deal after completion.
Bottom Line?
The raised EPS range is encouraging, but the next test is how much of the improvement remains after tariff refunds, restructuring costs and working-capital swings are stripped out.
Questions in the middle?
- Can STERIS sustain its stronger Life Sciences growth once the current capital equipment surge moderates?
- How quickly will the US$9 million restructuring savings emerge, and will the US$45 million cost estimate hold?
- What financial contribution and revised guidance will follow if the proposed Xodus Medical acquisition closes?