Investors in STERIS plc (NYSE:STE) had a good week, as its shares rose 2.2% to close at US$233 following the release of its quarterly results. STERIS reported US$1.2b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$1.42 beat expectations, being 6.5% higher than what the analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
After the latest results, the five analysts covering STERIS are now predicting revenues of US$4.94b in 2023. If met, this would reflect a meaningful 16% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 124% to US$6.25. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$5.03b and earnings per share (EPS) of US$5.96 in 2023. So the consensus seems to have become somewhat more optimistic on STERIS' earnings potential following these results.
There's been no major changes to the consensus price target of US$251, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on STERIS, with the most bullish analyst valuing it at US$295 and the most bearish at US$189 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that STERIS' rate of growth is expected to accelerate meaningfully, with the forecast 13% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 8.0% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 8.2% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect STERIS to grow faster than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards STERIS following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for STERIS going out to 2024, and you can see them free on our platform here.
Plus, you should also learn about the 4 warning signs we've spotted with STERIS .
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