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Here's Why You Should Hold on to Hill-Rom (HRC) Stock Now
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Hill-Rom Holdings, Inc. has been progressing steadily on the back of strategic acquisitions and a diverse product portfolio. However, tough competition and macroeconomic headwinds have been offsetting the positives to some extent.
In the past year, the company’s shares have outperformed its industry. The stock has gained 31.8% compared with the industry’s growth of 18.5%.
This $7.60-billion global medical device company expects earnings growth of 11.7% over the next five years. Also, it has a trailing four-quarter positive earnings surprise of 2.7%, on average.
Let’s delve deeper into the factors that substantiate the company’s Zacks Rank #3 (Hold).
Strategic Acquisitions: Hill-Rom has been proactively pursuing acquisitions to accelerate growth across five key clinical focus areas — advancing patient mobility, wound care and prevention, surgical, safety and efficiency, clinical workflow solutions as well as respiratory help. The company continues to gain from the acquisition of Voalte. In August 2019, it announced the buyout of Breath Technologies, a developer and manufacturer of a patented nasal cannula technology that enables improved patient mobility. This acquisition is expected to drive Hill-Rom’s growth through fiscal 2020 as well.
Impressive Product Portfolio: Of late, the company has been focusing on expansion through product development as reflected in higher research and development expenditure. The contribution from new products has been a significant driver of top-line growth in fiscal 2019, adding 300 basis points in this period. Recently, it introduced several products including RetinaVue 700 Imager, EarlySense and WatchCare. With other products in the pipeline, Hill-Rom expects to register durable growth in the upcoming period.
Progress in Digital Health Space: Hill-Rom recently launched a smartphone application — Linq mobile. Per the company, the platform has integrated Clinical Workflows with Nurse Call and clinical surveillance with monitoring systems to enhance team communication as well as efficiency. In line with its strategy to boost position in the Digital Health space, Hill-Rom recently partnered with Microsoft. This alliance is also expected to contribute to the company’s top line through fiscal 2020.
However, there are some factors that have been deterring the stock’s growth.
Macroeconomic Headwind May Hamper Growth: In the past several years, the credit and capital markets have experienced extreme volatility and disruption. These factors have led to recessionary conditions and lowered levels of consumer as well as commercial spending. Phases of recessions have compelled customers to reduce or delay plans to purchase Hill-Rom’s products and services, which led to a slowdown in its market growth rate.
Tough Competitive Landscape: The presence of a large number of players like ArjoHuntleigh (Division of Getinge AB), Universal Hospital Services, Inc, Stryker Corporation, GE Healthcare and Philips has intensified competition in the medical devices market.
Which Way Are Estimates Heading?
For the first quarter of fiscal 2020, the Zacks Consensus Estimate for earnings is pegged at $1.08 that indicates 5.9% growth from the year-ago quarter’s figure. The same for revenues stands at $685.3 million, which calls for year-over-year improvement of 0.3%.
For fiscal 2020, the Zacks Consensus Estimate for earnings is pegged at $5.53, which suggests 8.9% year-over-year growth. The same for revenues stands at $2.94 billion that calls for 1.1% rise year over year.
Haemonetics has a projected long-term earnings growth rate of 13.5%.
NuVasive has an expected long-term earnings growth rate of 10.9%.
Omnicell has a long-term earnings growth rate of 12.5%.
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Here's Why You Should Hold on to Hill-Rom (HRC) Stock Now
Hill-Rom Holdings, Inc. has been progressing steadily on the back of strategic acquisitions and a diverse product portfolio. However, tough competition and macroeconomic headwinds have been offsetting the positives to some extent.
In the past year, the company’s shares have outperformed its industry. The stock has gained 31.8% compared with the industry’s growth of 18.5%.
This $7.60-billion global medical device company expects earnings growth of 11.7% over the next five years. Also, it has a trailing four-quarter positive earnings surprise of 2.7%, on average.
Let’s delve deeper into the factors that substantiate the company’s Zacks Rank #3 (Hold).
Strategic Acquisitions: Hill-Rom has been proactively pursuing acquisitions to accelerate growth across five key clinical focus areas — advancing patient mobility, wound care and prevention, surgical, safety and efficiency, clinical workflow solutions as well as respiratory help. The company continues to gain from the acquisition of Voalte. In August 2019, it announced the buyout of Breath Technologies, a developer and manufacturer of a patented nasal cannula technology that enables improved patient mobility. This acquisition is expected to drive Hill-Rom’s growth through fiscal 2020 as well.
Impressive Product Portfolio: Of late, the company has been focusing on expansion through product development as reflected in higher research and development expenditure. The contribution from new products has been a significant driver of top-line growth in fiscal 2019, adding 300 basis points in this period. Recently, it introduced several products including RetinaVue 700 Imager, EarlySense and WatchCare. With other products in the pipeline, Hill-Rom expects to register durable growth in the upcoming period.
Progress in Digital Health Space: Hill-Rom recently launched a smartphone application — Linq mobile. Per the company, the platform has integrated Clinical Workflows with Nurse Call and clinical surveillance with monitoring systems to enhance team communication as well as efficiency. In line with its strategy to boost position in the Digital Health space, Hill-Rom recently partnered with Microsoft. This alliance is also expected to contribute to the company’s top line through fiscal 2020.
However, there are some factors that have been deterring the stock’s growth.
Macroeconomic Headwind May Hamper Growth: In the past several years, the credit and capital markets have experienced extreme volatility and disruption. These factors have led to recessionary conditions and lowered levels of consumer as well as commercial spending. Phases of recessions have compelled customers to reduce or delay plans to purchase Hill-Rom’s products and services, which led to a slowdown in its market growth rate.
Tough Competitive Landscape: The presence of a large number of players like ArjoHuntleigh (Division of Getinge AB), Universal Hospital Services, Inc, Stryker Corporation, GE Healthcare and Philips has intensified competition in the medical devices market.
Which Way Are Estimates Heading?
For the first quarter of fiscal 2020, the Zacks Consensus Estimate for earnings is pegged at $1.08 that indicates 5.9% growth from the year-ago quarter’s figure. The same for revenues stands at $685.3 million, which calls for year-over-year improvement of 0.3%.
For fiscal 2020, the Zacks Consensus Estimate for earnings is pegged at $5.53, which suggests 8.9% year-over-year growth. The same for revenues stands at $2.94 billion that calls for 1.1% rise year over year.
Stocks Worth a Look
Some better-ranked stocks from the broader medical space are Haemonetics Corporation (HAE - Free Report) , NuVasive, Inc and Omnicell (OMCL - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Haemonetics has a projected long-term earnings growth rate of 13.5%.
NuVasive has an expected long-term earnings growth rate of 10.9%.
Omnicell has a long-term earnings growth rate of 12.5%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>