Back to top

Image: Bigstock

Hill-Rom's (HRC) Q2 Earnings Top Estimates, Margins Expand

Read MoreHide Full Article

Hill-Rom Holdings, Inc. (HRC - Free Report) reported second-quarter fiscal 2020 adjusted earnings per share (EPS) of $1.28, excluding the impact of certain one-time acquisition-related amortization expenses among others. The figure improved 12.3% from the year-ago quarter and also surpassed the Zacks Consensus Estimate by the same margin.

On a GAAP basis, earnings were 70 cents per share, reflecting a 5.4% decline from the year-ago reported figure.

Revenues

Revenues in the fiscal second quarter came in at $723.2 million, up 1.3% from the year-ago quarter (up 2.2% at constant exchange rate or CER). The top line beat the Zacks Consensus Estimate by 3.3%. The revenue growth reflects the impact of the divestiture of surgical consumables in 2019.

Geographically, in the reported quarter, U.S. revenues inched up 2.7% while the metric outside the United States declined 2% (up 0.9% at CER).

Segmental Update

In the quarter under review, Patient Support Systems revenues rose 6.3% year over year (up 7.2% at CER) to $382.1 million. This segment’s core revenues were up 8%, resulting from double-digit growth of med-surg and specialty bed systems, including the Centrella Smart+ Bed and Progressa bed system for the ICU, and the company's care communications Voalte mobile platform. The segment benefitted from the majority of the early COVID-19 related demand.

The core international growth of 5% was driven by significant demand for the company’s ICU beds, particularly in Canada.

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


Revenues at the Front Line Care segment improved 6.2% to $258.2 million (up 7% at CER). According to the company, this was driven by broad-based global strength across Welch Allyn vital signs monitoring equipment, including thermometry and blood pressure monitoring, and respiratory health products like the MetaNeb System and the Life2000 non-invasive ventilator.

The Surgical Solutions segment’s revenues declined 25.7% (down 24.6% at CER) to $82.9 million affected by the surgical revenue divestment. Core revenues fell 3% as strong growth in the United States was offset by timing of large capital projects in select markets.

Margin

In the reported quarter, gross profit totaled $367.5 million. Gross margin expanded 145 basis points (bps) to 50.8% on a 4.2% rise in gross profit.

Selling, general and administrative expenses expanded 2.9% to $209.9 million in the quarter under review, while research and development expenses fell 6% to $34.4 million.

Overall adjusted operating profit was $123.2 million, up 9.9% year over year. Moreover, adjusted operating margin expanded 134 bps year over year to 17%.

Cash Position

The company exited the fiscal second quarter with cash and cash equivalents of $290.5 million compared with $204.4 million at the end of the first quarter of fiscal 2020. The company raised its dividend for the tenth consecutive year and also returned $99 million to shareholders through dividends and share repurchases during the first six months of fiscal 2020.

Year to date, cumulative net cash, cash equivalents and restricted cash provided by operating activities was $156.7 million compared with $77 million at the end of the year-ago period.

Fiscal 2020 Guidance

Hill-Rom has been witnessing an increase in demand across many areas of the portfolio, which according to the company, has continued into the fiscal third quarter. However, it is also experiencing project delays, mainly in its Surgical Solutions and Care Communications businesses. Impacts to other products are arising due to fewer physician office visits.

The company is currently unable to ascertain the scope and duration of the pandemic as well as quantify the actual impact on its full-year operations and financial results. Hence, it is unable to provide any update to its existing guidance and will provide additional information as appropriate.

For investor’s note, the last-provided guidance for adjusted EPS was pegged at the range of $5.50-5.56 and revenue growth expectation for the full fiscal in the 1-2% range, both on reported and constant currency basis.

Our Take

Hill-Rom exited second-quarter fiscal 2020 with better-than-expected results. The company saw a solid year-over-year increase in revenues on robust domestic growth, boosted by sturdy performance in majority of segments and geographies. The coronavirus pandemic has bumped up demand for the company’s products like ICU beds and thermometry. Expansion of both margins buoys optimism as well.

The company’s efforts to combat the pandemic is noteworthy. It received emergency use authorization from the FDA to enhance its MetaNeb System for respiratory support. It also added a new feature to the Connex Vital Signs Monitor and included a remote monitoring platform to simplify connectivity to the recently-launched Welch Allyn Spot 4400 Vital Signs Monitor to remotely monitor patients. Further, it launched a remote mobile software solution, Voalte Extend, to respond to customers' emergent needs as well ramped up production of the Life2000 non-invasive ventilator. It also partnered with AgileMD to offer a digital COVID-19 solution.

However, internationally, sales suffered due to the unfavorable timing of large capital projects in select markets. Sales in Surgical Solutions’ dropped significantly, thanks to the divestiture of surgical consumables. Also, the company is not providing any guidance for 2020, raising apprehensions.

Zacks Rank and Key Picks

Hill-Rom currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Aphria Inc. (APHA - Free Report) , Biogen Inc. (BIIB - Free Report) and Eli Lilly and Company (LLY - Free Report) .

Aphria reported third-quarter fiscal 2020 adjusted EPS of 2 cents, comparing favorably with the Zacks Consensus Estimate of a loss of 4 cents. Its net revenues of $64.4 million outpaced the consensus estimate by 14.6%. The company carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Biogen currently carries a Zacks Rank #2. It reported first-quarter 2020 adjusted EPS of $9.14, surpassing the Zacks Consensus Estimate by 18.1%. Its revenues of $3.53 billion outpaced the consensus mark by 3.2%.

Eli Lilly delivered first-quarter 2020 EPS of $1.75, outpacing the Zacks Consensus Estimate by 12.9%. Its first-quarter revenues of $145.3 million surpassed the consensus estimate by 6.3%. The company currently sports a Zacks Rank #1.

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>>


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Biogen Inc. (BIIB) - free report >>

Eli Lilly and Company (LLY) - free report >>

HillRom Holdings, Inc. (HRC) - free report >>

Aphria Inc. (APHA) - free report >>