Sotera Health’s 4Q Results Beat Analysts’ Expectations As Sales Outperform; Street Says Buy

Sotera Health reported better-than-expected 4Q results driven by top-line growth in all segments. Shares of the integrated health and sterilization services provider plunged 4.4% to close at $25.50 on March 8.

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Sotera Health’s (SHC) 4Q adjusted earnings more than doubled to $0.09 per share on a year-over-year basis and beat the Street estimates of $0.07 per share. Revenues advanced 12% to $217 million and surpassed the consensus estimate of $212.29 million.

The company’s adjusted EBITDA came in at $113 million, up 20% year-over-year. (See Sotera Health stock analysis on TipRanks)

Sotera Health CEO Michael B. Petras, Jr. commented, “Our three businesses – Sterigenics, Nordion and Nelson Labs – successfully navigated a global pandemic, pivoting to meet increased demand for products and services critical to protecting against the coronavirus, while ensuring continuity and quality of service for our broad-spectrum of healthcare customers.”

For 2021, the company projects adjusted EPS to range from $0.78 to $0.86 per share, versus the consensus estimate of $0.69. Net revenues are anticipated to be in the range of $890 million to $920 million, versus analysts’ expectations of $894.7 million. Adjusted EBITDA is expected to land between $465 million to $485 million.

On March 2, Barclays analyst Luke Sergott initiated coverage of the stock with a Buy rating and a price target of $35 (37.3% upside potential).

The analyst highlights “the company’s position as one of only a few global providers of sterilization and lab testing services, which is a tightly regulated space with high barriers to entry and a sticky customer base.”

“A closer look at the gamma radiation sterilization business reveals plenty to appeal to a cash flow investor, including a high-single-digit growth rate driven by stable and rising demand for mission-critical sterilization services,” Sergott added.

The consensus rating among analysts is a Strong Buy based on 9 unanimous Buys. The average analyst price target stands at $32.61 and implies upside potential of almost 28% to current levels over the next 12 months.

Additionally, Sotera Health scores an 8 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.