On Aug 14, we issued an updated research report on Ohio-based STERIS plc STE - a manufacturer and marketer of infection prevention, decontamination, microbial reduction along with surgical and gastrointestinal support products and services. The company currently carries a Zacks Rank #2 (Buy).
STERIS posted better-than-expected results in first-quarter fiscal 2018 with both earnings and revenues beating the Zacks Consensus Estimate. However, the year-over-year decline in revenues is dampening.
On a positive note, organic growth performance was strong across all segments. Further, growth in free cash flow reserve is indicative of the company's strong cash balance. Also, gross and operating margin expanded year over year. Recently, the company made a couple of organizational changes to serve customers in a better way. We expect this move to enhance the company's cost structure as well. Over the last three months, the stock has gained 13.1%, which outperformed the 1.1% decline of the broader industry .
However, we note that the government and insurance companies' consistent efforts to curb healthcare costs have been putting pressure on the stock for quite some time. We are also concerned about the current customer consolidation scenario which will continue to affect the company, unless checked immediately. The competitive landscape and weak cost reduction initiatives are other overhangs.
Other Key Picks
Other top-ranked medical stocks are Edwards Lifesciences Corp. EW , Stryker Corporation SYK and Align Technology, Inc. ALGN . Edwards Lifesciences and Align Technology sport a Zacks Rank #1 (Strong Buy), while Stryker carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.
Edwards Lifesciences has a positive earnings surprise of 10.75% for the trailing four quarters. The stock has gained around 0.9% over the last three months.
Align Technology has a long-term expected earnings growth rate of 26.6%. The stock has rallied roughly 25.4% over the last three months.
Stryker has a long-term expected earnings growth rate of 10.0%. The stock has gained 5.9% over the last three months.
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