Hill-Rom Holdings, Inc. HRC has been showing a solid progress, driven by a sturdy segmental performance and a diversified product portfolio.
The company has a market cap of $6.49 billion. It has an expected earnings growth rate of 11.5% for the next five years.
Over the past year, this company’s share price has outperformed its industry. The stock has gained 7.2% compared with the industry’s 3.2% increase and the S&P 500 Index’s 3.2% rise.
Riding on solid prospects, this Zacks Rank #3 (Hold) stock is worth retaining for now.
What’s Favoring the Stock?
Strategic Acquisitions: Hill-Rom has been proactively pursuing acquisitions to accelerate growth across five key clinical focus areas viz. advancing patient mobility, wound care and prevention, surgical, safety and efficiency, clinical workflow solutions and respiratory help. The company’s recent buyout of Voalte, a mobile health care communication player that is expected to speed up the company’s digital and mobile communications platform capabilities, deserves special mention. Other significant transactions in recent times are Welch Allyn and Trumpf.
Impressive Product Portfolio: Of late, the company has been focusing on expansion through product development, which is reflected in its rising research and development expenditure. Recently, the company introduced several products including Centrella, the Connex Vital Signs Spot Monitor, the Monarch Airway Clearance System, Integrated Table Motion and Vision Care portfolio.
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 and efficiency. In line with its strategy to boost position in the Digital Health space, Hill-Rom lately partnered with Microsoft. The alliance will converge Hill-Rom's extensive clinical knowledge as well as streaming operational data from medical devices with Microsoft's cloud including Azure IoT and Azure Machine Learning.
However, there are a few factors, which have been deterring the stock’s growth stock.
Macroeconomic Headwind May Hamper Growth: Over the past several years, the credit and capital markets have experienced extreme volatility and disruption causing phases of recessionary conditions and depressed levels of consumer and commercial spending. Recessionary conditions have compelled customers to reduce or delay plans to purchase Hill-Rom’s products and services, inducing a slowdown in the company’s market growth rate.
Foreign Exchange Headwind to Persist: Hill-Rom generates a large portion of its revenues from outside the United States. Unfavorable currency movement continued to be a major dampener during the fiscal first quarter and the company does not expect improvement in this scenario any time soon.
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, Philips have made the medical devices market intensely competitive.
Which Way Are Estimates Heading?
For the third quarter of fiscal 2019, the Zacks Consensus Estimate for earnings is pegged at $1.22, indicating 6.1% growth from the year-ago reported figure. The same for revenues stands at $719.4 million, implying a year-over-year improvement of 1.5% from the prior-year reported number.
For 2019, the Zacks Consensus Estimate for earnings is pinned at $5.05, suggesting 6.3% year-over-year growth from the year-earlier reported figure. The same for revenues is pegged at $2.90 billion, hinting at 1.8% rise from the reported figure in the comparable quarter last year.
Stocks to Consider
Some better-ranked stocks in the broader medical space are Cerner Corporation CERN, Penumbra PEN and Bruker Corporation BRKR. While Cerner sports a Zacks Rank #1 (Strong Buy), Penumbra and Bruker carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cerner’s long-term earnings growth rate is expected to be 13.5%.
Penumbra’s long-term earnings growth rate is projected at 21.5%.
Bruker’s long-term earnings growth rate is estimated at 11.7%.
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