Q4 2024 Earnings Summary
- • Consistent strong performance in the Healthcare segment*, with 13% constant currency organic revenue growth in fiscal 2024, marking the third consecutive year of double-digit growth for this segment. The company expects mid-single-digit growth in Healthcare for fiscal 2025 , driven by strong demand and a well-positioned product portfolio.
- • Anticipated acceleration in the AST segment*, with high single-digit growth expected for fiscal 2025 and growth accelerating in the second half of the year. Stabilization in bioprocessing demand and a potential robust turnaround in the European market support this outlook.
- • Positive overall outlook for fiscal 2025*, with reported revenue from continuing operations expected to increase 6.5% to 7.5%, and adjusted earnings per diluted share anticipated to increase 10% to 13% to a range of $9.05 to $9.25. EBIT margins are expected to improve as some headwinds from fiscal 2024 abate.
- Healthcare equipment revenue growth is expected to slow from double-digit to low single-digit rates due to normalization of backlog and tougher comparisons.
- Pricing benefits are projected to decrease in fiscal '25, with pricing contribution reducing from 270 basis points in fiscal '24 to an anticipated 200 basis points.
- First half of fiscal '25 is expected to have lighter revenue and margins due to tough comparisons, indicating potential uneven growth during the year.
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Revenue Pacing and Earnings Growth
Q: Is first-half growth below the full-year guide?
A: Management expects the first half of fiscal '25 to be a bit lighter in revenue and margin due to tough comparisons, with growth ramping up in the second half. While they don't provide a revenue split, they indicate earnings will be more weighted towards the second half. -
Healthcare Equipment Revenue Expectations
Q: Why won't healthcare equipment revenue moderate if backlog is normal?
A: Despite normalizing lead times and backlog levels, demand remains high, and annual order intake is significantly higher than four years ago. While they don't expect to grow at the same double-digit pace as last year, they anticipate low single-digit growth in healthcare capital equipment revenue. -
AST Growth and European Recovery
Q: Where do we stand on the inventory overhang in Europe?
A: The U.S. market has recovered, with medical devices growing at double digits in the second half. Europe's recovery is slower, possibly due to procedural rates, but management is confident that in the second half of the year, there will be a robust turnaround in Europe. -
Pricing Assumptions for Fiscal '25
Q: How much pricing is assumed in fiscal '25 guidance?
A: For fiscal '24, the total consolidated favorable price impact was 270 basis points. In fiscal '25 guidance, they are assuming around 200 basis points of favorable price. -
M&A Plans After Divestiture
Q: Should we expect near-term deals after the dental divestiture?
A: The company has the capacity—both financially and operationally—for acquisitions but will pursue opportunities as they arise. They are experienced in acquisitions and integration, emphasizing that such opportunities must present themselves. -
Gamma Radiation Capacity and X-ray Expansion
Q: Thoughts on gamma supply vs. demand as bioprocessing returns?
A: The company is expanding x-ray capacity to address gaps in gamma radiation supply due to isotope shortages. New sites are coming online over the next two years, positioning them well to meet increasing demand for radiation processing. -
Impact of Life Sciences Divestiture on EPS
Q: Any impact on margins or EPS from the Life Sciences divestiture?
A: The divestiture was small, causing minimal negative impact on Life Sciences growth rates and no impact on the bottom line. No financing considerations are necessary. -
Competitive Environment and In-sourcing
Q: How is the industry changing amid sterilization regulations?
A: STERIS is well-positioned as a technology-neutral and location-neutral company, supporting customers whether they in-source or outsource sterilization. They've expanded capacity and are working with regulatory agencies to lower barriers for alternative methods.