Hill-Rom (HRC) Touches 52-Week High: What's Driving It?
On Aug 23, shares of Hill-Rom Holdings, Inc. HRC reached a 52-week high of $98.74, closing the session marginally lower at $98.28. Hill-Rom’s impressive fiscal third-quarter 2018 results also contributed to the stock’s rally.
In the past year, shares of Hill-Rom have rallied 32.3% compared with the industry’s growth of 21.7%. The current level is also higher than the S&P 500 index’s growth of 17.7%.
Further, Hill-Rom is expected to scale new highs in the near term. The company has an average positive earnings surprise of 5.9% for the trailing four quarters.
Which Way Are Estimates Treading?
The estimate revision trend for the current year is impressive as well. Over the past 30 days, the Zacks Consensus Estimate for earnings inched up 0.2% to $4.63.
The stock carries a Zacks Rank #3 (Hold).
The stock currently carries a Zacks Rank #3 (Hold).
Factors Driving Hill-Rom
Impressive Quarterly Results
Hill-Rom exited the fiscal third quarter on a strong note. The company saw a solid year-over-year increase in revenues on robust domestic growth, driven by a sturdy performance in Patient Support Systems and Surgical Solutions.
Hill-Rom Holdings, Inc. Price and Consensus
Hill-Rom Holdings, Inc. Price and Consensus | Hill-Rom Holdings, Inc. Quote
Focus on Expansion Through Innovation
For quite some time, Hill-Rom focused on expansion through product development, which is reflected in the company’s rising trend of research and development spending. The company is focusing on product innovation through research and development. Within the Surgical Solutions business, Hill-Rom and IMRIS recently announced the commercial launch of a multi-functional OR table designed particularly for the IMRIS Surgical Theatre.
Hill-Rom is also gaining from recent product launches. Year to date, it has raked in more than $180 million from new products.
In the recently reported quarter, gross margin was 49.1%, up 106 basis points (bps) year over year. Adjusted gross margin grew 80 bps, buoyed by a positive contribution from product mix, primarily related to portfolio optimization initiatives and new products as well as benefits from manufacturing productivity and procurement efforts. Adjusted operating margin expanded 214 bps to 13.1% in the reported quarter.
Gains From Entry Into Digital Health Space
Hill-Rom is set to launch its smartphone application — Linq mobile — in the near term. Per the company, the Linq mobile platform will integrate Clinical Workflows with Nurse Call, a clinical surveillance in monitoring systems to enhance care team communication and efficiency. Per management, this move will pave the way for an additional market opportunity of around $200 million.
Patients are being moved through the hospital faster and generally desire to rapidly move to lower acuity settings. This trend indicates increase in demand for more sophisticated means to deliver care for these patients, such as improved medical technologies, communication tools and information technologies.
This, in turn, expands Hill-Rom’s scope of growth. We believe that the company’s constant efforts to meet changing demand with new differentiated products will lead to further revenue growth and improve margins in the future.
Some better-ranked stocks in the broader medical space are Integer Holdings Corporation ITGR, Intuitive Surgical ISRG and Masimo Corporation MASI.
Integer Holdings’ expected long-term earnings growth rate is 15%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical’s long-term expected earnings growth rate is 14.7%. The stock carries a Zacks Rank #2 (Buy).
Masimo’s long-term expected earnings growth rate is 14.8%. The stock has a Zacks Rank #2.
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