A month has gone by since the last earnings report for Hill-Rom Holdings Inc . Shares have added about 11.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
Hill-Rom reported first-quarter fiscal 2017 adjusted earnings per share (EPS) of $0.75, up 10.3% from the year-ago quarter. Though adjusted earnings were in line with the Zacks Consensus Estimate, the figure marked the lower end of the company’s projected range of $0.75–$0.77.
In spite of a sluggish top-line performance, continued gross margin expansion and disciplined cost management cumulatively drove the year-over-year earnings improvement.
Including one-time adjustments, Hill-Rom’s net income in the fiscal first quarter was $23.5 million or $0.36 per share compared with the year-ago net income of $4.3 million or $0.07.
Revenue Details
Revenues in the first quarter of fiscal 2017 decreased 3.6% year over year to $637.4 million (down 2.7% at Constant Exchange Rate or CER). It also missed the Zacks Consensus Estimate of $651 million. The downside can be attributed to a 4.1% decline in product sales and service revenues to $541.9 million, marginally offset by flat year-over-year rental revenues of $95.5 million.
Geographically, U.S. revenues grew 1% to $448 million while revenues outside the U.S. declined 12.9% (down 10.3%) to $190 million.
Revenues were affected by the unfavorable timing of certain international and U.S. distributor orders and lower revenue from businesses that the company recently divested or plans to sell.
Reportable Segments
In the fiscal first quarter, North America Patient Support Systems revenues dropped 1.9% year over year (down 1.1% at CER) to $335.2 million. However, the segment’s domestic revenues of $248 million rose 3%, reflecting stable customer demand. Despite a difficult comparison, the improvement in revenues was driven by a large customer order from last year and lower revenues from divested businesses.
Revenues at the Front Line Care segment, which includes both Welch Allyn and Respiratory Care, declined 8.4% to $202.8 million (down 8% at CER). The performance was impacted by the timing of certain international and U.S. distributor orders.
On a positive note, the Surgical Solutions segment revenues inched up 1.1% (up 3.2% at CER) to $100.4 million. Growth was driven by double-digit rise in key markets such as Europe and the U.S., where Hill-Rom continues to gain traction with its Integrated Table Motion and surgical positioning products driving robust revenue growth.
Margins
Reported gross margin in the fiscal first quarter was 47.5%, up 351 basis points (bps) year over year on account of a 9.6% decrease in total cost of revenue. Adjusted gross margin grew 40 bps to 47.5%. Adjusted operating margin improved 140 bps to 14.6% owing to higher gross margin and disciplined cost management.
Outlook
Hill-Rom provided its second quarter 2017 financial outlook and reaffirmed its 2017 full-year adjusted earnings per diluted share and cash flow guidance.
Not considering any impact of the impending Mortara Instrument acquisition, Hill-Rom expects revenue growth of 2–3% on a reported basis (or 3–4% at CER) in the fiscal second quarter. Excluding the impact of completed or potential divestitures from both the periods, Hill-Rom's core revenues are expected to increase 4–5% at CER. Hill-Rom also expects adjusted EPS in the range of $0.77 to $0.79.
For the full year, Hill-Rom still expects revenue growth of 1% on a reported basis (or up 2% at CER). Excluding the impact of completed and potential divestitures (with 2016 annual revenue of approximately $75 million) from both the periods, Hill-Rom's core revenues are expected to increase 3–4% at CER. In addition, the company continues to expect adjusted earnings of $3.74–$3.82 per share and operating cash flow of $330–$340 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been six revisions lower for the current quarter. In the past month, the consensus estimate has shifted 7.02% downward due to these changes.
VGM Scores
At this time, Hill-Rom's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #2 (Buy). We are looking for an above average return from the stock in the next few months.
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Why Is Hill-Rom (HRC) Up 11.5% Since the Last Earnings Report?
A month has gone by since the last earnings report for Hill-Rom Holdings Inc . Shares have added about 11.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
Hill-Rom reported first-quarter fiscal 2017 adjusted earnings per share (EPS) of $0.75, up 10.3% from the year-ago quarter. Though adjusted earnings were in line with the Zacks Consensus Estimate, the figure marked the lower end of the company’s projected range of $0.75–$0.77.
In spite of a sluggish top-line performance, continued gross margin expansion and disciplined cost management cumulatively drove the year-over-year earnings improvement.
Including one-time adjustments, Hill-Rom’s net income in the fiscal first quarter was $23.5 million or $0.36 per share compared with the year-ago net income of $4.3 million or $0.07.
Revenue Details
Revenues in the first quarter of fiscal 2017 decreased 3.6% year over year to $637.4 million (down 2.7% at Constant Exchange Rate or CER). It also missed the Zacks Consensus Estimate of $651 million. The downside can be attributed to a 4.1% decline in product sales and service revenues to $541.9 million, marginally offset by flat year-over-year rental revenues of $95.5 million.
Geographically, U.S. revenues grew 1% to $448 million while revenues outside the U.S. declined 12.9% (down 10.3%) to $190 million.
Revenues were affected by the unfavorable timing of certain international and U.S. distributor orders and lower revenue from businesses that the company recently divested or plans to sell.
Reportable Segments
In the fiscal first quarter, North America Patient Support Systems revenues dropped 1.9% year over year (down 1.1% at CER) to $335.2 million. However, the segment’s domestic revenues of $248 million rose 3%, reflecting stable customer demand. Despite a difficult comparison, the improvement in revenues was driven by a large customer order from last year and lower revenues from divested businesses.
Revenues at the Front Line Care segment, which includes both Welch Allyn and Respiratory Care, declined 8.4% to $202.8 million (down 8% at CER). The performance was impacted by the timing of certain international and U.S. distributor orders.
On a positive note, the Surgical Solutions segment revenues inched up 1.1% (up 3.2% at CER) to $100.4 million. Growth was driven by double-digit rise in key markets such as Europe and the U.S., where Hill-Rom continues to gain traction with its Integrated Table Motion and surgical positioning products driving robust revenue growth.
Margins
Reported gross margin in the fiscal first quarter was 47.5%, up 351 basis points (bps) year over year on account of a 9.6% decrease in total cost of revenue. Adjusted gross margin grew 40 bps to 47.5%. Adjusted operating margin improved 140 bps to 14.6% owing to higher gross margin and disciplined cost management.
Outlook
Hill-Rom provided its second quarter 2017 financial outlook and reaffirmed its 2017 full-year adjusted earnings per diluted share and cash flow guidance.
Not considering any impact of the impending Mortara Instrument acquisition, Hill-Rom expects revenue growth of 2–3% on a reported basis (or 3–4% at CER) in the fiscal second quarter. Excluding the impact of completed or potential divestitures from both the periods, Hill-Rom's core revenues are expected to increase 4–5% at CER. Hill-Rom also expects adjusted EPS in the range of $0.77 to $0.79.
For the full year, Hill-Rom still expects revenue growth of 1% on a reported basis (or up 2% at CER). Excluding the impact of completed and potential divestitures (with 2016 annual revenue of approximately $75 million) from both the periods, Hill-Rom's core revenues are expected to increase 3–4% at CER. In addition, the company continues to expect adjusted earnings of $3.74–$3.82 per share and operating cash flow of $330–$340 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been six revisions lower for the current quarter. In the past month, the consensus estimate has shifted 7.02% downward due to these changes.
Hill-Rom Holdings Inc Price and Consensus
Hill-Rom Holdings Inc Price and Consensus | Hill-Rom Holdings Inc Quote
VGM Scores
At this time, Hill-Rom's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #2 (Buy). We are looking for an above average return from the stock in the next few months.