STE - Steris lower as Piper Sandler downgrades on outlook

2023-04-14 10:43:56 ET

Shares of sterilization service provider Steris ( NYSE: STE ) traded lower Friday after Piper Sandler downgraded the stock expecting the company to issue below consensus guidance and citing multiple headwinds to its margins.

STE’s rivals in sterilization services, Sotera Health ( SHC ) and Becton, Dickinson ( BDX ), are also in the red.

Citing effects of past inflationary pressure, higher cost of sales, and shift in product mix to lower margin capital equipment, the analyst Jason Bednar projects an 80-100bp impact on STE’s margins for FY24.

Expecting a more conservative approach from management, Bednar wrote: “We do anticipate management’s formal EPS guidance that will be provided next month will fall short of consensus.”

The analyst trims his estimates to a level expected from the management guidance and adjusts the trading multiple used for the company to reflect the lower near- to intermediate-term earnings outlook.

Piper downgrades Steris ( STE ) to Neutral from Overweight and sets its price target to $197 from $215 per share.

Additionally, the firm doesn’t rule out a potential increase in the company’s compliance costs due to the recently updated guidelines from the Environmental Protection Agency regarding ethylene oxide emissions.

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