Skip to content
    STE
    Earnings call· Mar 2026(Q4 FY26)

    STERIS Q4 FY26 earnings call STE

    May 12, 2026 Source

    Executive summary

    STERIS Q4 FY26 — Record Year with Strong Revenue and EPS Growth

    STERIS concluded a record fiscal year 2026, achieving strong revenue and double-digit adjusted EPS growth, despite tariff and inflation headwinds. The company provided a positive outlook for fiscal 2027, anticipating continued organic growth and margin expansion, supported by strategic capital allocation and tuck-in acquisitions. Management highlighted operational improvements and high-margin consumables as key drivers for future performance.

    Highlights

    5

    • Total as reported revenue grew 7% in Q4 FY26, with constant currency organic revenue up 5%.

    • FY26 total revenue grew 9% (7% constant currency organic) and adjusted EPS grew 10% to $10.17.

    • Healthcare segment achieved $4 billion in revenue and $1 billion in operating income in FY26.

    • AST segment exceeded $1 billion in revenue and $500 million in operating profit in FY26.

    • Free cash flow for FY26 was exceptional at $982.9 million, driven by increased earnings.

    Concerns

    5

    • Gross margin for Q4 FY26 was 44%, down 30 bps YoY, impacted by higher tariffs and inflation.

    • EBIT margin for Q4 FY26 was 24.2%, down 60 bps YoY, driven by inflation and tariffs.

    • Incremental tariffs impacted Q4 FY26 by $10 million and FY26 by $46 million (80 bps margin).

    • Adjusted effective tax rate in Q4 FY26 increased to 25.4% (from 23.5% YoY) and is guided to 25% for FY27 due to geographic mix and withholding taxes.

    • AST segment experienced softness in H2 FY26, with Q4 impacted by severe snowstorms and med tech customers managing inventory carefully.

    Guidance & targets

    13
    CategoryTargetConfidence
    As-reported revenue growth
    7% to 8%
    high materiality
    High
    Constant currency organic revenue growth
    6% to 7%
    high materiality
    High
    Price contribution to organic revenue growth
    ~200 basis points
    medium materiality
    High
    Healthcare constant currency organic growth
    6% to 7%
    medium materiality
    High
    Life Sciences constant currency organic growth
    6% to 7%
    medium materiality
    High
    AST constant currency organic growth
    7% to 8%
    medium materiality
    High
    EBIT margins expansion
    ~50 basis points
    high materiality
    High
    Adjusted EPS
    $11.10 to $11.30
    high materiality
    High
    Free cash flow
    $850 million
    high materiality
    High
    Capital expenditures
    $375 million
    medium materiality
    High
    Adjusted effective tax rate
    25%
    medium materiality
    High
    Annual share buybacks
    $200 million to $300 million
    high materiality
    High
    Sterility assurance manufacturing plant investment
    $60 million
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Healthcare
    Achieved new milestones in FY26, driven by strong service and consumables growth. Capital equipment stabilized after prior lumpiness.
    Constant currency organic growth: 8%Service growth: 12%Consumables growth: 7%Capital equipment growth: 6%Capital equipment backlog: just under $400 millionQ4 orders: up 2%
    		$4 billion9% as reported—$1 billion operating income
    AST
    Crossed new milestones in FY26. Growth was lighter than anticipated in H2 FY26, with Q4 impacted by severe snowstorms. Med tech customers are managing inventory carefully.
    Constant currency organic growth: 7%Services business growth: 11% as reportedServices business constant currency organic growth: ~8%
    		over $1 billion10% as reported—over $500 million operating profit
    Life Sciences
    Posted a record year in FY26, reflecting strong operating margins. Capital equipment recovered following a prior-year downturn, and consumables continued steady growth.
    Constant currency organic growth: 7%Capital equipment growth: 15%Consumables growth: 8%Services improvement: 5%Capital equipment backlog: just under $100 million
    		—9% as reported—exceeding $250 million operating profit

    Operational metrics

    22
    Constant currency organic revenue growth
    5%
    Q4 FY26

    Driven by volume and price.

    Gross margin
    44%down 30 bps vs prior year
    Q4 FY26

    Impacted by higher tariffs and inflation, partially mitigated by positive pricing.

    EBIT margin
    24.2%60 bps below prior year
    Q4 FY26

    Mainly driven by inflation and tariffs.

    Incremental tariffs impact
    $10 millionbelow expectations
    Q4 FY26

    Lower than expected due to lower volumes in materials and products sourced from outside the U.S.

    Adjusted effective tax rate
    25.4%increase from 23.5% prior year
    Q4 FY26

    Driven primarily by changes in geographic mix and unfavorable discrete items.

    Adjusted effective tax rate
    24.4%increase of 130 bps from FY25
    FY26

    Varies based on geographic profit mix and discrete item adjustments, including withholding taxes.

    Capital expenditures
    $369 million
    FY26

    Total for fiscal year 2026.

    Depreciation and amortization
    $486.5 million
    FY26

    Total for fiscal year 2026.

    Total debt
    $1.9 billion
    FY26 end

    Reflecting a strong balance sheet.

    Gross debt to EBITDA
    1.2xwell below target of 2 to 2.5x
    FY26 end

    Indicates strong financial position.

    Adjusted net income
    over $1 billion
    FY26

    Topping $1 billion for the first time.

    EBIT margins
    23.3%expanded 10 bps
    FY26

    Expanded despite incremental tariff costs.

    Incremental tariff costs
    $46 million
    FY26

    Trimmed margin by 80 basis points.

    Adjusted EPS
    $10.17
    FY26

    Lower interest contributed to double-digit growth.

    Dividend per share
    $0.63increased $0.06
    Quarterly

    Increased quarterly dividend as part of capital deployment priorities.

    Share buybacks executed
    $225 million
    FY26

    Utilized for share buybacks as part of capital deployment priorities.

    Share buyback authorization
    $1 billion
    New authorization

    Board approved new authorization.

    Tuck-in acquisitions revenue contribution
    $45 million
    FY27

    Expected combined revenue contribution from two acquisitions in Healthcare.

    Sterility assurance manufacturing plant investment
    $60 million
    Over 2 years

    Investment to build a new state-of-the-art manufacturing center of excellence.

    Average constant currency organic revenue growth
    9%
    Last 5 years

    Average growth over the last five years.

    Compounded annual growth rate for adjusted earnings
    11%
    Last 5 years

    CAGR for adjusted earnings over the last five years.

    Raw materials as % of COGS
    <20%
    Current

    Metals, plastics, electronics, chemicals are largest inputs, but represent a small portion of COGS.

    Industry KPIs

    8
    MetricValueDetails
    Tariff impact$10 million; $46 millionUSD
    Pricing realized price230 bpsbps
    Procedure volume growthmid-single digits%
    FCF conversion leverage guidanceFCF: $982.9 million; Gross debt to EBITDA: 1.2xUSD; x
    Installed base system placementsHealthcare backlog: just under $400 million; Life Sciences backlog: just under $100 millionUSD
    Segment franchise organic growthHealthcare: 8%; AST: 7%; Life Sciences: 7%%
    Consumables recurring revenue mixHealthcare: 7%; Life Sciences: 8%%
    Sales force commercial capacity build20-25sales reps

    Product announcements

    2
    ProductTypeDetails
    MEDglas wallsupdate
    GI productslaunch

    Deals & partnerships

    2
    Supplier for MEDglas wallsVertical integration of a supplier for MEDglas walls, extending STERIS's reach from the U.S. to global markets.

    Acquisition of a supplier for MEDglas walls, which are used in ORs and sterile processing departments.

    UndisclosedAcquisition of a family of GI products to expand STERIS's offering and improve its channel.

    Acquisition includes basic GI products, some small capital equipment, and 20-25 sales reps established in the U.S.

    Risks & headwinds

    4
    Higher tariffs and inflationQ4 FY26, FY26

    Q4 FY26 gross margin down 30 bps YoY; Q4 FY26 EBIT margin down 60 bps YoY; Q4 FY26 incremental tariffs $10 million; FY26 incremental tariffs $46 million (80 bps margin impact).

    Mitigation: Positive pricing helped mitigate the impact. FY27 tariffs expected to be flat year-over-year, with recent changes being favorable.

    Increased adjusted effective tax rateQ4 FY26, FY26, FY27

    Q4 FY26 rate 25.4% (up from 23.5% YoY); FY26 rate 24.4% (up 130 bps from FY25); FY27 guidance 25%.

    Mitigation: Primarily due to geographic profit mix, discrete items, and anticipated U.S. withholding taxes from cross-border cash movements for capital deployment (dividends, buybacks, M&A).

    Softness in AST segment / Med tech customer inventory managementH2 FY26, Q4 FY26, H1 FY27 (difficult comps)

    AST H2 FY26 softer than anticipated; Q4 FY26 impacted by severe snowstorms (150-200 bps lost growth).

    Mitigation: Taking a more conservative approach on AST outlook for FY27. Management believes procedure rates are still growing, suggesting an inventory pullback rather than a demand issue.

    Energy/oil-driven costs (freight, raw materials)FY27

    Raw materials impacted by oil represent less than 20% of COGS. Freight is the largest challenge.

    Mitigation: Incorporated into FY27 guidance; opportunities to recover most freight costs through pricing; day-to-day fuel for service techs not significant.

    What to watch in Q1 FY27

    5

    AST organic growth phasing

    H1 FY27, Q3 FY27, Q4 FY27
    CurrentQ4 FY26 softer due to snowstorms; H2 FY26 softer overall.
    TargetImprovement in Q3 FY27, easier comps in Q4 FY27.

    Why it matters

    AST is a high-margin business; its recovery and inventory normalization will impact overall profitability.

    Yes, really more specific to the AST comps. We started the year last year, first couple of quarters in double-digit growth in that business. and then saw a bit of a slowdown in Q3 where we saw some inventory flow back from our customers. And then this past quarter got a little weird just with the snowstorms. We probably lost time 150 to 200 basis points of growth there. So if you sort of stack all that up, I think one would expect a slower start in the first half and then significantly improving in Q3 and then pretty easy comps in Q4.

    Q&A highlights

    8

    Can you walk through the moving pieces for the anticipated 50 bps EBIT margin expansion in FY27, including inflation, energy prices, tariffs, and underlying performance?

    Management expects to maximize the 50 bps expansion through operational improvements and continued sell-through of higher-margin consumables. Tariffs are expected to be favorable in FY27, offsetting volume increases. A $20 million bonus tailwind is expected from modeling 100% achievement in FY27 versus overachievement in FY26. Freight is the largest challenge, but most costs are recoverable, and raw materials impacted by oil are less than 20% of COGS.

    “The good news is in terms of tariffs, the recent changes are favorable to us. and served to offset the volume increase for next year. So in an odd twist, tariffs are an okay thing for us looking at '27.”

    asked by Brett Fishbin · answered by Karen Burton

    2 min read6 chapters

    Detailed Narrative

    01

    Fiscal 2026 Performance Highlights

    STERIS achieved a record fiscal year 2026 with 9% total revenue growth and 10% adjusted EPS growth, reaching approximately $6 billion in total revenue and over $1 billion in adjusted net income. All segments hit new milestones, with Healthcare generating $4 billion in revenue and AST exceeding $1 billion in revenue and $500 million in operating profit. The company's EBIT margins expanded by 10 basis points to 23.3% for the year, despite significant tariff costs.

    02

    Capital Allocation and Shareholder Returns

    The company increased its quarterly dividend for the 20th consecutive year to $0.63 per share. STERIS also completed two tuck-in acquisitions in Healthcare and executed $225 million in share buybacks during the year. A new $1 billion buyback authorization was approved by the Board, with plans to consistently buy back shares in the range of $200 million to $300 million annually, utilizing excess cash.

    03

    Strategic Investments and Operational Efficiency

    STERIS is investing in a multi-year project to upgrade service workflows with AI technology to improve quality and productivity in Healthcare and Life Science segments. Additionally, a new $60 million sterility assurance manufacturing plant will be built in Mentor, Ohio, over two years, expected to be operational by the end of calendar 2027. This plant will consolidate existing U.S. production into a state-of-the-art center of excellence, supporting the long-term growth of a high-margin business.

    04

    Tariff and Tax Rate Dynamics

    Incremental tariffs impacted FY26 margins by 80 basis points, totaling $46 million. For FY27, tariffs are expected to be flat year-over-year, with recent changes being favorable. The adjusted effective tax rate increased to 24.4% in FY26 and is projected to be 25% in FY27, primarily due to geographic profit mix and anticipated U.S. withholding taxes from cross-border cash movements for capital deployment activities like dividends and buybacks.

    05

    AST Segment Inventory Management

    The AST segment experienced softness in the second half of FY26, with Q4 impacted by severe snowstorms, leading to an estimated 150-200 basis points of lost growth. Med tech customers are carefully managing inventory levels, contributing to a more conservative outlook for AST in FY27, particularly in the first half due to difficult comparisons. Management noted that U.S. procedure volumes continue to grow mid-single digits, suggesting an inventory pullback rather than a fundamental demand issue.

    06

    Life Sciences Recovery and Growth Drivers

    Life Sciences saw a recovery in capital equipment, growing 15% in FY26, following a prior-year downturn. Consumables continued steady growth at 8%, contributing significantly to the segment's performance. The company is optimistic about the segment's future, driven by reshoring trends and new facility builds, particularly from large pharma customers, despite a current lack of investment in smaller biotech firms.

    AI-generated summary of the company’s earnings call. Not investment advice.