Steris Earnings Preview

Investors are bracing for the worst and waiting to see if Steris (NYSE: STE  ) will fall short of Wall Street forecasts for the third consecutive quarter. The company will unveil its latest earnings on Tuesday. Steris is a provider of infection prevention and surgical products and services, focused mainly on the critical markets of health care, pharmaceuticals, and research.

What analysts say:

• Buy, sell, or hold?: The majority of analysts back Steris as a buy. But with 60% of analysts rating it a buy, Steris is still below the mean analyst rating of its nearest 10 competitors, which average 67.5% buys. Analysts don't like Steris as much as competitor Hill-Rom Holdings overall. Six out of eight analysts rate Hill-Rom Holdings a buy compared to three of five for Steris.
• Revenue forecasts: On average, analysts predict $363.4 million in revenue this quarter. That would represent a rise of 10.7% from the year-ago quarter.
• Wall Street earnings expectations: The average analyst estimate is earnings of $0.61 per share. Estimates range from $0.54 to $0.67.

What our community says:
CAPS All-Stars are strongly supporting the stock, with 89.3% giving it an outperform rating. The community at large backs the All-Stars, with 82.4% granting it a rating of outperform. Fools are bullish on Steris, though the message boards have been quiet lately with only 47 posts in the past 30 days. Steris' bearish CAPS rating of two out of five stars falls short of the Fool community sentiment.

Management:
Revenue has now gone up for three straight quarters. The company's gross margin shrank by 4.3 percentage points in the last quarter. Revenue rose 9.7% while cost of sales rose 18.1% to $209.4 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter	Q2	Q1	Q4	Q3
Gross Margin	38.9%	41.7%	41.3%	41.7%
Operating Margin	13.9%	14.7%	15.2%	10.9%
Net Margin	8.6%	9.0%	10.3%	6.6%

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Earnings estimates provided by Zacks.