Barron's Article Makes Comments on Steris (STE); Sees Potential For Continued Growth With Flu Season Upon Us

October 5, 2009 12:22 PM EDT

Barron's article makes comments on Steris (NYSE: STE).

Some Positive Points Include:

1) Leading supplier of sterilization and disinfectant equipment and services to hospitals and clinics. Recently, hand-sanitizers have been selling out in the wake of the swine flu pandemic.

2) Even if H1N1 virus and other flu threats subside, Steris' sales (and share price) could keep going. It's shares could gain another 20% to 30% as growth resumes in hospital spending and as demand for sterilization products accelerates.

3) STE also makes and markets infection-prevention products, from sterilant solutions to scrub stations and operating tables.

4) Several trends favor Steris' business: Aging baby boomers and their health problems. If the Obama administration's push to reform health care doesn't succeed, hospitals face pressure to improve the quality of care. Already, 25 states require hospitals to report infection rates.

5) CEO predicts "Demand for health-care goods and services will be strong for the next 10 to 20 years."

6) The company plans to cut $20 million in costs this year, atop $45 million through 2009. Steris also is counting on new products to boost margins and profits.

7) Steris has a strong balance sheet, with $176 million of cash and $210 million of debt, equal to 22% of total capitalization as of June 30.

Some Negative Points Include:

1) Stiff competition including Cantel Medical (NYSE: CMN), which offers a small-cap play on swine-flu prevention, and Johnson & Johnson (NYSE: JNJ), which is benefiting from increased sales of the hand sanitizer, Purell.

2) Restructuring charges and weak hospital spending have hurt Steris in recent years.

3) Steris has been hurt by some regulatory issues. In 2008 it received a warning letter from the Food & Drug Administration alleging it made changes to one of its sterile processors without regulatory approval.

4) Skeptics like Natixis Bleichroeder analyst Joshua Zable see few catalysts for a near-term pick-up in Steris' sales.

STERIS Corporation develops, manufactures, and markets infection prevention, contamination control, microbial reduction, and surgical support products and services to healthcare, pharmaceutical, scientific, research, industrial, and governmental customers worldwide.

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• Natixis Bleichroeder
• Barron's
• Barack Obama

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