Steris Earnings: On Track to Reach Revenue Growth Goal Despite Legal Risk Overhang

Narrow-moat Steris reported fiscal 2025 second-quarter results in line with our expectations. Total revenue from continuing operations increased 7% year on year to $1.3 billion. Most of this was driven by volume growth, but 240 basis points was attributable to price increases. The company is on track to reach its reiterated fiscal 2025 revenue growth goal of 6.5%-7.5%. However, it also disclosed an ongoing lawsuit against its former ethylene oxide sterilization facility in Illinois. As the largest contract sterilization provider, Steris has held a clean safety record with regard to its EO operations. We maintain our $231 fair value estimate as we believe the potential negative impacts from the lawsuit will only be short-term. We think EO will remain the mainstream technology to sterilize medical equipment; half of all medical equipment sold in the US is sterilized using EO, and a rapid shift to alternative technologies could lead to severe supply shortages.