It has been about a month since the last earnings report for Hill-Rom Holdings Inc . Shares have added about 3.6% 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.
Hill-Rom Beats Earnings & Revenue Estimates in Q2
Hill-Rom Holdings, Inc. reported second-quarter fiscal 2017 adjusted earnings per share (EPS) of $0.88, up 23.9% from the year-ago quarter. Not only did adjusted earnings surpass the Zacks Consensus Estimate of $0.79, the figure also exceeded the company’s projected range of $0.77-$0.79.
Along with a strong top-line beat, continued gross margin expansion, disciplined cost management and a tax benefit of $0.06 per share cumulatively drove the year-over-year earnings improvement.
Including one-time adjustments, Hill-Rom’s net income in the fiscal second quarter was $34.4 million or $0.51 per share compared with the year-ago net income of $22.3 million or $0.33 cents.
Revenue Details
Revenues in the second quarter of fiscal 2017 increased 7.3% year over year to $678.9 million (increased 8.0% at Constant Exchange Rate or CER). It also outpaced the Zacks Consensus Estimate of $654 million. Revenue growth was driven by the momentum in the company’s core business, the acquisition of Mortara and value from newly-introduced products like Connex, Spot Monitor, Spot Vision Screener, RetinaVue and Integrated Table Motion. The improved international performance in Europe, the Middle East and Latin America also contributed to revenue growth in the second quarter.
Geographically, U.S. revenues grew 6% to $464 million while revenues outside the U.S. increased 11.0% (up 14% CER) to $215 million. Core revenue growth was 7% at CER, exceeding the company’s guided range of 4-5%.
Reportable Segments
In the fiscal second quarter, Patient Support Systems revenues increased 3% year over year (up 3.8% at CER) to $362.9 million. However, the segment’s domestic revenues rose 1.8%, reflecting 4% growth in U.S. core revenues on mid-single digit growth in bed systems, all of which was partially offset by a decline in rental revenues. This segment saw international growth of 9%, as barring Asia Pacific the company saw strong growth across all other international regions.
Revenues at the Front Line Care segment, which includes both Welch Allyn and Respiratory Care, increased 13.9% to $211 million (increased 14.5% at CER). The performance was driven by gains in the thermometry business and vital signs portfolio, international growth and introduction of new products.
The Surgical Solutions segment revenues increased 10.4% (up 12.4% at CER) to $105 million. Growth was backed by continued strength of the surgical positioning products in the Integrated Table Motion system. Growth was also driven by 13% revenue rise in domestic market. International revenues were up 12%, driven by double-digit growth in Europe, Latin America and the Middle East.
Margins
Reported gross margin in the fiscal second quarter was 47.8%, down 30 basis points (bps) year over year on account of a 7.9% increase in total cost of revenue. Adjusted gross margin grew 10 bps to 48.0% on the back of the company’s consistent initiative with portfolio diversification and on benefits from cost and sourcing efficiencies. Adjusted operating margin improved 110 bps to 15.0% owing to higher gross margin and SG&A leverage.
Outlook
Hill-Rom provided its third-quarter 2017 financial outlook and raised its fiscal 2017 adjusted earnings per diluted share and cash flow guidance.
Considering Mortara revenues of approximately $30 million, Hill-Rom expects revenue growth of 5.0-6.0% on a reported basis (or 6.0-7.0% at CER) in the fiscal third quarter. Excluding Mortara and the impact of completed or potential divestitures from both the periods, Hill-Rom's core revenues are expected to increase 4.0-5.0% at CER. Hill-Rom also expects adjusted EPS in the range of $0.89 cents to $0.91.
For the full year, Hill-Rom still expects revenue growth of 3.5–4.0% on a reported basis (or up 4.5–5.0% at CER). Excluding Mortara and the impact of completed and potential divestitures (with 2016 annual revenues of approximately $75 million) from both the periods, Hill-Rom's core revenues are still expected to increase 3.5–4.0% at CER. In addition, the company expects adjusted earnings of $3.82–$3.88 per share (earlier $3.74-$3.82) and maintains operating cash flow guidance at the previous range 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 downward by 7.6% due to these changes.
VGM Scores
At this time, Hill-Rom's stock has a subpar score of 'D', on both growth and momentum front. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
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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Hill-Rom (HRC) Up 3.6% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Hill-Rom Holdings Inc . Shares have added about 3.6% 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.
Hill-Rom Beats Earnings & Revenue Estimates in Q2
Hill-Rom Holdings, Inc. reported second-quarter fiscal 2017 adjusted earnings per share (EPS) of $0.88, up 23.9% from the year-ago quarter. Not only did adjusted earnings surpass the Zacks Consensus Estimate of $0.79, the figure also exceeded the company’s projected range of $0.77-$0.79.
Along with a strong top-line beat, continued gross margin expansion, disciplined cost management and a tax benefit of $0.06 per share cumulatively drove the year-over-year earnings improvement.
Including one-time adjustments, Hill-Rom’s net income in the fiscal second quarter was $34.4 million or $0.51 per share compared with the year-ago net income of $22.3 million or $0.33 cents.
Revenue Details
Revenues in the second quarter of fiscal 2017 increased 7.3% year over year to $678.9 million (increased 8.0% at Constant Exchange Rate or CER). It also outpaced the Zacks Consensus Estimate of $654 million. Revenue growth was driven by the momentum in the company’s core business, the acquisition of Mortara and value from newly-introduced products like Connex, Spot Monitor, Spot Vision Screener, RetinaVue and Integrated Table Motion. The improved international performance in Europe, the Middle East and Latin America also contributed to revenue growth in the second quarter.
Geographically, U.S. revenues grew 6% to $464 million while revenues outside the U.S. increased 11.0% (up 14% CER) to $215 million. Core revenue growth was 7% at CER, exceeding the company’s guided range of 4-5%.
Reportable Segments
In the fiscal second quarter, Patient Support Systems revenues increased 3% year over year (up 3.8% at CER) to $362.9 million. However, the segment’s domestic revenues rose 1.8%, reflecting 4% growth in U.S. core revenues on mid-single digit growth in bed systems, all of which was partially offset by a decline in rental revenues. This segment saw international growth of 9%, as barring Asia Pacific the company saw strong growth across all other international regions.
Revenues at the Front Line Care segment, which includes both Welch Allyn and Respiratory Care, increased 13.9% to $211 million (increased 14.5% at CER). The performance was driven by gains in the thermometry business and vital signs portfolio, international growth and introduction of new products.
The Surgical Solutions segment revenues increased 10.4% (up 12.4% at CER) to $105 million. Growth was backed by continued strength of the surgical positioning products in the Integrated Table Motion system. Growth was also driven by 13% revenue rise in domestic market. International revenues were up 12%, driven by double-digit growth in Europe, Latin America and the Middle East.
Margins
Reported gross margin in the fiscal second quarter was 47.8%, down 30 basis points (bps) year over year on account of a 7.9% increase in total cost of revenue. Adjusted gross margin grew 10 bps to 48.0% on the back of the company’s consistent initiative with portfolio diversification and on benefits from cost and sourcing efficiencies. Adjusted operating margin improved 110 bps to 15.0% owing to higher gross margin and SG&A leverage.
Outlook
Hill-Rom provided its third-quarter 2017 financial outlook and raised its fiscal 2017 adjusted earnings per diluted share and cash flow guidance.
Considering Mortara revenues of approximately $30 million, Hill-Rom expects revenue growth of 5.0-6.0% on a reported basis (or 6.0-7.0% at CER) in the fiscal third quarter. Excluding Mortara and the impact of completed or potential divestitures from both the periods, Hill-Rom's core revenues are expected to increase 4.0-5.0% at CER. Hill-Rom also expects adjusted EPS in the range of $0.89 cents to $0.91.
For the full year, Hill-Rom still expects revenue growth of 3.5–4.0% on a reported basis (or up 4.5–5.0% at CER). Excluding Mortara and the impact of completed and potential divestitures (with 2016 annual revenues of approximately $75 million) from both the periods, Hill-Rom's core revenues are still expected to increase 3.5–4.0% at CER. In addition, the company expects adjusted earnings of $3.82–$3.88 per share (earlier $3.74-$3.82) and maintains operating cash flow guidance at the previous range 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 downward by 7.6% 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 subpar score of 'D', on both growth and momentum front. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
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.