Steris Corp Earnings Cheat Sheet: Margins Shrink on Rising Costs, Net Income Falls

Rising costs hurt Steris Corporation (NYSE:STE) in the second quarter as profit dropped from a year earlier. STERIS is a provider of infection prevention and surgical products and services, focused mainly on the critical markets of healthcare, pharmaceutical and research.

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Steris Earnings Cheat Sheet for the Second Quarter

Results: Net income for Steris Corporation fell to $29.6 million (50 cents per share) vs. $35.7 million (59 cents per share) a year earlier. This is a decline of 17.2% from the year earlier quarter.

Revenue: Rose 9.7% to $342.7 million from the year earlier quarter.

Actual vs. Wall St. Expectations: STE fell short of the mean analyst estimate of 57 cents per share. It beat the average revenue estimate of $333.6 million.

Quoting Management: “We are pleased with our top line growth for the quarter and we believe that the underlying fundamentals in our markets are solid,” said Walt Rosebrough, President and Chief Executive Officer of STERIS. “Our Healthcare capital equipment sales increased mid-single digits, excluding SYSTEM 1E shipments, and we reported strong results in our other segments. Our operating results also include certain investments we are making for the long-term benefit of the Company, totaling $8 million in the quarter, which resulted in lower earnings. However, we anticipate that the amount of investment will be lower in the second half of the year. As a result, our outlook for the full year remains unchanged.”

Key Stats:

Gross margin shrank 4.3 percentage points to 38.9%. The contraction appeared to be driven by increased costs, which rose 18.1% from the year earlier quarter while revenue rose 9.7%.

Revenue has risen the past four quarters. Revenue increased 68.6% to $318.6 million in the first quarter. The figure rose 13.7% in the fourth quarter of the last fiscal year from the year earlier and climbed 0.1% in the third quarter of the last fiscal year from the year-ago quarter.

The company has now fallen short of analyst estimates for the last three quarters. It missed the mark by 2 cents in the first quarter and by 2 cents in the fourth quarter of the last fiscal year.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the third quarter has moved down from 63 cents a share to 62 cents over the last thirty days. For the fiscal year, the average estimate has moved down from $2.35 a share to $2.32 over the last ninety days.

Competitors to Watch: Stryker Corporation (NYSE:SYK), Cantel Medical Corp. (NYSE:CMN), Medical Action Industries (NASDAQ:MDCI), Kinetic Concepts, Inc. (NYSE:KCI), Invacare Corporation (NYSE:IVC), Becton, Dickinson and Co. (NYSE:BDX), Hill-Rom Holdings, Inc. (NYSE:HRC), Patient Safety Tech. Inc (PSTX), Thermo Fisher Scientific Inc. (NYSE:TMO), and Winner Medical Group, Inc (NASDAQ:WWIN).

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(Source: Xignite Financials)