Goldman Sachs analyst Matthew Sykes has improved his rating for Sotera Health (SHC, Financial) from Neutral to Buy, raising his price target for the company's stock to $17 from the previous $14. This revision suggests a potential 36% increase in stock value. According to Sykes, Sotera Health's business model has become increasingly appealing amidst current economic uncertainties, particularly due to its involvement with commercial pharmaceuticals and medical devices.
The analyst highlights Sotera's resilience in facing tariff-related uncertainties. The company's strategic focus on service-based operations through its subsidiaries, Sterigenics and Nelson Labs, helps mitigate these challenges. Additionally, products from Nelson Labs are exempt from tariffs under the U.S. annex, further enhancing its competitive edge. This advantageous positioning supports a promising outlook for Sotera Health's future performance.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 7 analysts, the average target price for Sotera Health Co (SHC, Financial) is $14.71 with a high estimate of $17.00 and a low estimate of $13.00. The average target implies an upside of 18.86% from the current price of $12.38. More detailed estimate data can be found on the Sotera Health Co (SHC) Forecast page.
Based on the consensus recommendation from 8 brokerage firms, Sotera Health Co's (SHC, Financial) average brokerage recommendation is currently 2.1, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Sotera Health Co (SHC, Financial) in one year is $16.65, suggesting a upside of 34.49% from the current price of $12.38. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Sotera Health Co (SHC) Summary page.
SHC Key Business Developments
Release Date: May 01, 2025
- Total Revenue: Increased by 2.6% to $255 million, or 4.4% on a constant currency basis compared to Q1 2024.
- Adjusted EBITDA: Increased by 8.8% to $122 million, equating to an 11.2% growth rate on a constant currency basis.
- Adjusted EBITDA Margin: 47.9%, a 276 basis point increase from Q1 2024.
- Adjusted EPS: $0.14, a $0.01 improvement versus Q1 2024.
- Net Loss (GAAP): $13 million or $0.05 per diluted share, inclusive of a $31 million settlement.
- Sterigenics Revenue: Grew 1.9% to $170 million, or 3.9% on a constant currency basis.
- Nordion Revenue: Increased 36% to $33 million, or 40.6% on a constant currency basis.
- Nelson Labs Revenue: Declined by 9.3% to $52 million.
- Interest Expense: Improved to $41 million from $42 million in Q1 2024.
- Available Liquidity: $715 million, including over $300 million of unrestricted cash.
- Capital Expenditures: $20 million for Q1 2025.
- Net Leverage Ratio: 3.6 times, improved from 3.7 times at the end of 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sotera Health Co (SHC, Financial) reported mid-single-digit top line growth and double-digit bottom line growth on a constant currency basis compared to Q1 2024.
- Sterigenics, the largest segment, achieved revenue growth of 1.9% and a margin expansion of approximately 30 basis points.
- Nordion's revenue increased by 36% due to early Cobalt-60 shipments, with a segment income margin expansion of nearly 860 basis points.
- Nelson Labs showed margin expansion for the third consecutive quarter, with a 479 basis point increase compared to Q1 2024.
- The company reaffirmed its 2025 outlook, expecting revenue growth of 4% to 6% and adjusted EBITDA growth of 4.5% to 6.5% on a constant currency basis.
Negative Points
- Foreign currency fluctuations presented a headwind of 180 basis points, particularly affecting the Canadian-based Nordion business.
- Net loss on a GAAP basis for Q1 2025 was $13 million, impacted by a $31 million settlement of EO claims in Illinois.
- Nelson Labs experienced a 9.3% revenue decline due to a decrease in expert advisory services revenue.
- The shift in Cobalt-60 shipments from Q2 to Q1 will impact Nordion's second-quarter revenues.
- Interest expense remains high, with a projection of $155 million to $165 million for the full year 2025.
