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Hill-Rom (HRC) FLC Growth Continues, Surgical Arm Stays Dull

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On Dec 1, we issued an updated research report on Hill-Rom Holdings, Inc. (HRC - Free Report) . The company is witnessing a solid uptick in domestic revenues, driven by a sturdy performance in Patient Support Systems and Front-Line Care. The stock carries a Zacks Rank #3 (Hold), at present.

Shares of Hill-Rom have outperformed the industry in the past six months. The stock has gained 2.5% as against the industry's 17.3% decline.

Geographically, amid the pandemic blues, the company’s international performance was strong with core revenue growth of nearly 40% due to a surge in demand for COVID-19-related products like ICU and Med-Surg beds, thermometry and vital signs monitoring equipment.

Through the fourth quarter of fiscal 2021, within the company’s Patient Support Systems (PSS) segment, bed orders and backlog in the United States accelerated. The remaining PSS portfolio experienced encouraging sequential improvement. This includes the Care Communications business with a sequential increase of nearly 30%. As hospital access restrictions have eased, quoting activities accelerated and revenues rebounded to near pre-COVID levels.

Within Front Line Care (FLC), revenues increased 1% year over year driven by double-digit growth in vital signs monitoring, blood pressure and thermometry as well as the completion of the U.S. stockpile order for noninvasive ventilators. The remaining Front Line Care portfolio though down year over year, showed 15% sequential improvement, as U.S. physician office visits resumed.

On the flip side, Hill-Rom saw a year-over-year fall in both revenues and earnings in the fiscal fourth quarter. While there was recovery in emerging market businesses, U.S. core revenues declined significantly in the quarter due to lower capital revenues from beds and surgical equipment.

Within PSS, revenues declined 13%, reflecting a challenging year-over-year comparison despite the third-quarter peak COVID-19 demand for Med-Surg and ICU beds. Bed revenues declined more than 20% overall despite a COVID-related tailwind of approximately $25 million. Within Surgical Solutions, sales declined 29%, reflecting a difficult year-over-year comparison, the remaining impact of the surgical consumables divestiture and the impact of capital project timing.

While providing the fiscal 2021 guidance, Hill-Rom noted that in this period demand for its COVID-19 support products that peaked during fiscal 2020 will normalize.

Overall, in the past six months, Hill-Rom has underperformed its industry. The stock has lost 7.3% against the industry's 8.5% rise.

Key Picks

A few better-ranked stocks from the broader medical space are Hologic (HOLX - Free Report) , ResMed (RMD - Free Report) and Thermo Fisher Scientific (TMO - Free Report) .

Hologic’s long-term earnings growth rate is estimated at 17.4%. It currently sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

ResMed’s long-term earnings growth rate is estimated at 14.5%. The company presently carries a Zacks Rank #2.

Thermo Fisher’s long-term earnings growth rate is estimated at 18%. It currently carries a Zacks Rank #2.

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