We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Hill-Rom (HRC) Beats on Q3 Earnings; Overseas Sales Dull
Read MoreHide Full Article
Hill-Rom Holdings, Inc. reported third-quarter fiscal 2016 adjusted earnings per share (EPS) of 81 cents, up 31% from the year-ago quarter. Adjusted earnings also beat the Zacks Consensus Estimate by a nickel as well as surpassed the company’s expectation of 75–77 cents.
Strong revenue growth in the U.S. across all of the company’s businesses, the successful integration of Welch Allyn, double-digit growth in the Asia-Pacific region and continued operational execution cumulatively drove the year-over-year earnings improvement.
Including one-time adjustments, Hill-Rom’s net income in the fiscal third quarter was $45.3 million or 68 cents per share, reflecting a solid year-over-year improvement of 137.2% and 106.1%, respectively.
Revenues in the third-quarter fiscal 2016 increased 38% year over year to $655.4 million (up 39% at Constant Exchange Rate or CER) and also exceeded the Zacks Consensus Estimate of $647 million. On a pro forma constant currency basis, revenue growth was 2.3%, which exhibited stand-alone Welch Allyn and Hill-Rom revenue in both the third quarters of fiscal 2016 and 2015. The upside was primarily driven by low-single-digit growth in product sales and service revenue as well as rental revenue, at CER.
Geographically, U.S. revenue surged 47% to $451 million, while revenues outside the U.S. increased 24% at CER to $204 million owing to the addition of Welch Allyn.
In the fiscal third quarter, North America revenues increased 6% year over year (up 6% at CER) to $268 million. While North America product sales and service rose 8% to $196 million, rental revenues improved 2% at CER to $72 million. Moreover, product sales and service orders grew 4% while backlog at this segment increased 16%. .
Revenues at the Front Line Care segment, which includes both Welch Allyn and Respiratory Care, grossed $193 million. The Respiratory Care franchise of this segment improved 7%, on the back of strong new product momentum in the U.S. Revenues improved 3% at Welch Allyn on a pro forma CER basis.
Surgical Solutions segment revenues increased 3% (up 3% at CER) to $102 million. Within this segment, U.S. sales grew 13% on account of Trumpf and Allen Medical, while international revenues declined with particular weakness witnessed in the Middle East.
Hill-Rom’s International business sales deteriorated 8% (down 8% at CER) year over year to $93 million. Similar to the first two quarters' results of this fiscal, significant macroeconomic headwinds in the Middle East primarily led to the sales decline.
Margin
Reported gross margin in the fiscal third quarter was 48.1%, up 390 basis points (bps) year over year despite a 28.3% increase in total cost of revenue. Adjusted gross margin grew 340 bps to 48.1%, driven by improvement in the organic Hill-Rom business and the addition of Welch Allyn.
Adjusted operating margin improved 350 bps to 11% owing to higher gross margin and SG&A leverage. On the other hand, selling and administrative expenses increased 39.5% to $209.9 million, while research and development expenses rose 44.2% to $33.6 million.
Outlook
Hill-Rom updated its fiscal 2016 revenue guidance. The company now expects revenue to be approximately $2.65 billion, compared with the earlier guidance range of $2.64–$2.67 billion; reflecting 2% to 3% pro forma constant currency growth and negative currency impact of approximately 2% at current rates. Earlier, the negative currency impact on revenues was expected to be 2–3% for the fiscal. The current Zacks Consensus Estimate for revenues stands at $2.65 billion.
On the bottom-line front, the company revised its fiscal 2016 adjusted earnings per share expectation to the range of $3.32–$3.34, up from the prior guidance of $3.26–$3.30. The current Zacks Consensus Estimate stands at $3.31, lower than the company’s guidance.
Hill-Rom also provided its earnings and revenue projection for the fourth-quarter fiscal 2016. The company expects reported revenues between $695–$705 million, implying flat pro forma constant currency growth and a negative currency impact of approximately 1% at current rates. Fourth-quarter adjusted earnings per share are projected within $1.12–$1.14. The current Zacks Consensus Estimate for revenues and EPS stand at $712.5 million and $1.13, respectively.
Our Take
Hill-Rom ended third-quarter fiscal 2016 on a promising note, squarely beating the Zacks Consensus Estimate. The company’s outcome on a year-over-year basis was also impressive. On the profitability front, Hill-Rom delivered the highest level of gross margin this year. Geographically, the company posted strong growth in both Asia-Pacific and the U.S.
We also remain impressed with the company’s increased bottom-line guidance for fiscal 2016, while the revenue guidance for the same was not that encouraging.
Hill-Rom’s consistently poor performance in the International front keeps us on the sidelines, as the company has failed to overcome the challenges prevailing in the Middle East and Latin America.
The company currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better-ranked medical stocks worth a look are IDEXX Laboratories, Inc. (IDXX - Free Report) , Masimo Corporation (MASI - Free Report) and Natus Medical Inc. . All three stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Hill-Rom (HRC) Beats on Q3 Earnings; Overseas Sales Dull
Hill-Rom Holdings, Inc. reported third-quarter fiscal 2016 adjusted earnings per share (EPS) of 81 cents, up 31% from the year-ago quarter. Adjusted earnings also beat the Zacks Consensus Estimate by a nickel as well as surpassed the company’s expectation of 75–77 cents.
Strong revenue growth in the U.S. across all of the company’s businesses, the successful integration of Welch Allyn, double-digit growth in the Asia-Pacific region and continued operational execution cumulatively drove the year-over-year earnings improvement.
Including one-time adjustments, Hill-Rom’s net income in the fiscal third quarter was $45.3 million or 68 cents per share, reflecting a solid year-over-year improvement of 137.2% and 106.1%, respectively.
Revenue Details
Revenues in the third-quarter fiscal 2016 increased 38% year over year to $655.4 million (up 39% at Constant Exchange Rate or CER) and also exceeded the Zacks Consensus Estimate of $647 million. On a pro forma constant currency basis, revenue growth was 2.3%, which exhibited stand-alone Welch Allyn and Hill-Rom revenue in both the third quarters of fiscal 2016 and 2015. The upside was primarily driven by low-single-digit growth in product sales and service revenue as well as rental revenue, at CER.
Geographically, U.S. revenue surged 47% to $451 million, while revenues outside the U.S. increased 24% at CER to $204 million owing to the addition of Welch Allyn.
HILL-ROM HLDGS Price, Consensus and EPS Surprise
HILL-ROM HLDGS Price, Consensus and EPS Surprise | HILL-ROM HLDGS Quote
Reportable Segments
In the fiscal third quarter, North America revenues increased 6% year over year (up 6% at CER) to $268 million. While North America product sales and service rose 8% to $196 million, rental revenues improved 2% at CER to $72 million. Moreover, product sales and service orders grew 4% while backlog at this segment increased 16%. .
Revenues at the Front Line Care segment, which includes both Welch Allyn and Respiratory Care, grossed $193 million. The Respiratory Care franchise of this segment improved 7%, on the back of strong new product momentum in the U.S. Revenues improved 3% at Welch Allyn on a pro forma CER basis.
Surgical Solutions segment revenues increased 3% (up 3% at CER) to $102 million. Within this segment, U.S. sales grew 13% on account of Trumpf and Allen Medical, while international revenues declined with particular weakness witnessed in the Middle East.
Hill-Rom’s International business sales deteriorated 8% (down 8% at CER) year over year to $93 million. Similar to the first two quarters' results of this fiscal, significant macroeconomic headwinds in the Middle East primarily led to the sales decline.
Margin
Reported gross margin in the fiscal third quarter was 48.1%, up 390 basis points (bps) year over year despite a 28.3% increase in total cost of revenue. Adjusted gross margin grew 340 bps to 48.1%, driven by improvement in the organic Hill-Rom business and the addition of Welch Allyn.
Adjusted operating margin improved 350 bps to 11% owing to higher gross margin and SG&A leverage. On the other hand, selling and administrative expenses increased 39.5% to $209.9 million, while research and development expenses rose 44.2% to $33.6 million.
Outlook
Hill-Rom updated its fiscal 2016 revenue guidance. The company now expects revenue to be approximately $2.65 billion, compared with the earlier guidance range of $2.64–$2.67 billion; reflecting 2% to 3% pro forma constant currency growth and negative currency impact of approximately 2% at current rates. Earlier, the negative currency impact on revenues was expected to be 2–3% for the fiscal. The current Zacks Consensus Estimate for revenues stands at $2.65 billion.
On the bottom-line front, the company revised its fiscal 2016 adjusted earnings per share expectation to the range of $3.32–$3.34, up from the prior guidance of $3.26–$3.30. The current Zacks Consensus Estimate stands at $3.31, lower than the company’s guidance.
Hill-Rom also provided its earnings and revenue projection for the fourth-quarter fiscal 2016. The company expects reported revenues between $695–$705 million, implying flat pro forma constant currency growth and a negative currency impact of approximately 1% at current rates. Fourth-quarter adjusted earnings per share are projected within $1.12–$1.14. The current Zacks Consensus Estimate for revenues and EPS stand at $712.5 million and $1.13, respectively.
Our Take
Hill-Rom ended third-quarter fiscal 2016 on a promising note, squarely beating the Zacks Consensus Estimate. The company’s outcome on a year-over-year basis was also impressive. On the profitability front, Hill-Rom delivered the highest level of gross margin this year. Geographically, the company posted strong growth in both Asia-Pacific and the U.S.
We also remain impressed with the company’s increased bottom-line guidance for fiscal 2016, while the revenue guidance for the same was not that encouraging.
Hill-Rom’s consistently poor performance in the International front keeps us on the sidelines, as the company has failed to overcome the challenges prevailing in the Middle East and Latin America.
The company currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better-ranked medical stocks worth a look are IDEXX Laboratories, Inc. (IDXX - Free Report) , Masimo Corporation (MASI - Free Report) and Natus Medical Inc. . All three stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>