Steris Plc

FY26 performance was strong; Q4 lighter than expected - Q4 (continuing ops): total revenue +7% YoY; constant-currency organic +5% (driven by volume plus ~230 bps price). Gross margin 44% (down 30 bps YoY); EBIT margin 24.2% (a high but -60 bps YoY mainly from inflation/tariffs). - Tariffs impact: ~$10M in Q4 (better than expected) due to lower-than-expected outside-US volumes; incremental tariffs in FY26 = ~$46M, with total tariff spend modeled/expected FY26 between $60M–$65M. - Earnings/taxes: adjusted EPS $2.83 (+3% YoY); effective tax rate rose (Q4 25.4% vs 23.5% prior year). Company expects tax pressure to continue from withholding taxes tied to moving capital across borders.

FY26 full-year delivered record momentum and exceptional cash flow - FY26 growth: revenue +9%; constant-currency organic +7%; translated to 10% adjusted EPS growth despite tariff margin pressure (~80 bps margin trim from tariffs; Dan noted FY26 tariff spending trimmed margins ~80 bps overall). - Business milestones: all segments reached new highs—Healthcare +9% reported / +8% organic, Service +12%, Consumables +7%, Capital equipment +6%; AST +10% reported / +7% organic (services had softer Q4); Life Sciences +9% reported / +7% organic (driven by capital equipment +15%, consumables steady +8%). - Free cash flow: FY26 $982.9M (exceptional), helped by higher earnings more than offsetting much lower working-capital contribution vs FY25 (FY25 working capital benefited from inventory reductions after supply-chain issues). - Balance sheet: $1.9B total debt, gross debt/EBITDA ~1.2x (well below 2.0x–2.5x target).

FY27 outlook: moderate revenue growth, margin expansion modest, EPS up mid/high single digits - Revenue outlook (as-reported): +7% to +8% in FY27. FX slightly favorable; tuck-in acquisitions add inorganic revenue (~$45M combined to FY27). - Organic growth: 6% to 7% constant-currency, assuming ~200 bps price. - Segment organic targets: Healthcare & Life Sciences: 6% to 7%; AST: 7% to 8% (company is more conservative on AST early in the year due to inventory management/cautious med-tech customer behavior and difficult comps after strong prior-year periods). - Margins & EPS: EBIT margin expected to expand ~50 bps at the high end (assumes tariffs flat YoY + bonus tailwind from incentive comp). FY27 EPS guidance $11.10–$11.30 (~+9% to +11% vs FY26). - Cash flow/CapEx: FY27 free cash flow ~$850M; CapEx ~$375M. Working capital expected to grow in line with volumes (no repeat of FY26 working-capital tailwind).