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Hill-Rom (HRC) Beats on Q3 Earnings, Tightens '19 Guidance

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Hill-Rom Holdings, Inc. (HRC - Free Report) delivered third-quarter fiscal 2019 adjusted earnings per share (EPS) of $1.23 excluding certain special items. This figure improved 6.9% from the year-ago quarter and also surpassed the Zacks Consensus Estimate of $1.21 by 1.7%.

Moreover, revenues in the quarter came in at $726.8 million, reflecting a 2.6% increase from the year-ago period. The top line also beat the Zacks Consensus Estimate of $719 million by 1.1%.

Geographically, U.S. revenues grew 7.2% in the reported quarter while the metric outside the United States declined 8.1% (down 4.2% at constant exchange rate or CER). Core revenue growth (after excluding foreign currency, divestitures and non-strategic assets the company may exit including the Surgical Solutions international OEM business) was 6%, exceeding the company’s guidance of 4-5% growth.

Segment Details

In the quarter under review, Patient Support Systems revenues rose 6% year over year (up 7% at CER) to $375 million. This segment’s domestic revenues were up 8.3%, representing solid performance across the company’s diverse and differentiated portfolio of connected solutions and services, which include smart beds, clinical workflow solutions and mobile communications platform, Voalte.

Hill-Rom Holdings, Inc. Price, Consensus and EPS Surprise

Hill-Rom Holdings, Inc. Price, Consensus and EPS Surprise

Hill-Rom Holdings, Inc. price-consensus-eps-surprise-chart | Hill-Rom Holdings, Inc. Quote

Outside the United States, core Patient Support Systems revenues declined 8.1% (down 4.2% at CER). 

Revenues at the Front Line Care segment inched up 2.3% to $244.4 million (up 3.3% at CER), banking on revenue contribution from new products resulting in double-digit growth in vision and respiratory care. Further, robust growth of certain physical assessment and diagnostic tools aided the top line within this segment. Domestic revenues grew 5.3% while there was a 5% decrease in international revenues (down 1.4% at CER).

The Surgical Solutions segment revenues slipped 1.8% (up 0.2% at CER) to $107.9 million. While domestic revenues grew 8.3%, there was a 12.2% fall in international revenues (down 8.1% at CER).

Cash Position

The company exited the third quarter of fiscal 2019 with a cash and cash equivalent of $202.6 million compared with $187 million at the end of the sequential quarter. Year to date, net cash provided by operating activities was $301.1 million compared with $249.8 million at the end of the year-ago period.

Guidance   

Hill-Rom has updated its 2019 outlook. Adjusted EPS is now expected in the $5.03-5.05 range excluding special items, which is narrower than the earlier band of $5.02-5.06. The Zacks Consensus Estimate for fiscal 2019 earnings stands at $5.04, within the company’s guided band.

The company tapers its revenue expectation for the full year to 2% (at CER 3%) from the earlier-projected range of 2-3% (earlier range was 3-4% at CER). Core revenues are now projected to grow at 6% rate (earlier range was 5-6%). The Zacks Consensus Estimate for fiscal 2019 revenues is pegged at $2.90 billion.

For fourth-quarter fiscal 2019, revenues are expected to grow 1% on constant currency basis. Core revenue growth is predicted at 5%. The Zacks Consensus Estimate for quarterly revenues is pegged at $780.38 million.

Adjusted earnings in the fiscal fourth quarter  are estimated in the range of $1.64-$1.66 per share. The Zacks Consensus Estimate for the same stands at $1.67, above the company’s guided band.

Our Take

Hill-Rom exited the third quarter of fiscal 2019 on a strong note with better-than-expected results. The company saw a solid year-over-year increase in revenues on robust domestic growth, driven by sturdy performances in Patient Support Systems and Front Line Care.

We are also upbeat to note the company’s strong momentum across its diversified product portfolio, which includes Centrella Smart+ bed, Welch AllynConnex Spot Monitor, Monarch Airway Clearance System and Integrated Table Motion for the da Vinci Xi Surgical System. Additionally, the acquisition of Voalte buoys optimism as it boosts Hill-Rom’s digital and mobile communications platform.

On the flip side, international revenues of each of the company’s key segments have declined at CER.

Zacks Rank and Key Picks

Hill Rom currently holds a Zacks Rank #4 (Sell).

Some better-ranked stocks boasting solid results this earnings season are Stryker Corporation (SYK - Free Report) , Baxter International Inc. (BAX - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .

Stryker delivered second-quarter 2019 adjusted earnings per share of $1.98, beating the Zacks Consensus Estimate by 2.6%. Further, revenues of $3.65 billion surpassed the Zacks Consensus Estimate by 1.4%. The company carries a Zacks Rank #2.

Baxter posted second-quarter 2019 adjusted earnings of 89 cents per share, outpacing the Zacks Consensus Estimate of 81 cents by 9.9%. Moreover, revenues of $2.84 billion trumped the Zacks Consensus Estimate of $2.79 billion by 1.9%. The company has a Zacks Rank of 2.

Intuitive Surgical reported second-quarter 2019 adjusted earnings per share of $3.25, topping the Zacks Consensus Estimate of $2.85. Also, revenues of $1.1 billion exceeded the Zacks Consensus Estimate of $1.03 billion. The company sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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