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Product Launches Aid Hill-Rom Amid Project Timing Issues

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On Apr 6, we issued an updated research report on Hill-Rom Holdings, Inc. HRC. 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% loss.

Hill-Rom’s newly-initiated long-term growth strategies through fiscal 2022, focusing on all four strategic priorities look attractive at this moment. Hill-Rom’s merger and acquisition (M&A) pipeline continues to remain robust, as the company aggressively pursues acquisitions to accelerate growth in five key clinical focus areas. The company is also redirecting its focus on expansion through product development, which is reflected in its rising research and development expenditure. Progress in the company’s Digital Health Space and a favorable demographic trend also buoys optimism.

Contribution from new products was a significant top-line growth driver in 2019, adding 300 basis points (bps) of growth. The company expects to roll out five-six new products each year through 2022. Product launches are projected to result in the contribution of roughly 200 bps of expansion annually over the three-year plan.

Meanwhile, we note that in first-quarter fiscal 2020, core revenue growth was 6% year over year, at the higher end of its guided range. The company also registered robust domestic growth on sturdy performances of the Patient Support Systems. There was strong double-digit growth in Latin America and China for the second consecutive quarter.

However, global sales suffered due to the timing of large capital projects in some markets. Sales in Surgical Solutions’ dropped significantly due to the divestiture of surgical consumables. Further, global sales suffered due to the timing of large capital projects in some markets.

Key Picks

Some better-ranked stocks from the broader medical space are ResMed Inc. RMD, National Vision Holdings, Inc. EYE and Phibro Animal Health Corporation PAHC.

ResMed has a projected long-term earnings growth rate of 14.4%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

National Vision’s long-term earnings growth rate is estimated at 10.7%. The company presently holds a Zacks Rank of 2.

Phibro’s long-term earnings growth rate is estimated at 2.1%. It currently carries a Zacks Rank #2.

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