Steris Starts Fiscal 2021 With Split Segment Results; Increasing FVE on Improved Long-Term Outlook

Narrow-moat Steris reported first-quarter 2021 earnings that made clear the firm is not immune to the ongoing pandemic and recession, despite showing impressive resiliency to end-fiscal 2020. While Steris experienced sales headwinds (down 3% on a constant currency basis), net income improved over the year-ago period, and we are increasing our fair value estimate to $175 from $165 on this durable profitability result, and with contract sterilization margin tracking ahead of our longer-term expectations. Shares remain fairly valued after this valuation upgrade, and the market now appears to share our view that Steris’ long-term outlook is relatively unaffected by the pandemic.