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Hill-Rom's (HRC) Q1 Earnings Top Estimates, Revenues In Line

Zacks Equity Research

Hill-Rom Holdings, Inc. HRC reported first-quarter fiscal 2020 adjusted earnings per share (EPS) of $1.13 excluding certain special items. The figure improved 10.8% from the year-ago quarter and also surpassed the Zacks Consensus Estimate by 4.6%. This year-over-year upside came on the back of solid core revenue growth, margin expansion, strategic investments to drive future growth and a lower tax rate.

On a reported basis, earnings were 59 cents per share, indicating a 4.8% decline from the year-ago reported figure.

Additionally, revenues in the fiscal first quarter came in at $685 million, up 0.2% from the year-ago period (up 1% at constant exchange rate or CER). Meanwhile, the top line was on par with the Zacks Consensus Estimate. Dull revenue growth reflects the impact of the divestiture of surgical consumables in 2019.

Geographically, in the reported quarter, U.S. revenues inched up 2.8% while the metric outside the United States declined 5.5% (down 4% at constant exchange rate or CER).

Segmental Update

In the quarter under review, Patient Support Systems revenues rose 1% year over year (up 1% at CER) to $344 million. This segment’s core revenues were up 2%, representing strong U.S. core revenue growth on robust sales of the company's care communications and mobile offerings as well as its med-surg and specialty bed systems including the Centrella Smart+Bed. However, the U.S. uptick was partially offset by lower international revenues due to the timing of large capital projects in select markets.

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 9% to $255 million (up 9% at CER). According to the company, this was driven by broad-based global strength across Welch Allyn vital signs monitoring equipment, physical assessment tools, respiratory health products and the vision portfolio.

The Surgical Solutions segment’s revenues declined 21% (down 20% at CER) to $86 million, affected by the surgical revenue divestment. However, core revenues rose 9% on strong growth of surgical workflow equipment including Integrated Table Motion for the da Vinci Xi Surgical System.

Cash Position

The company exited the fiscal first quarter with cash and cash equivalents of $204.4 million compared with $214.1 million at the end of fiscal 2019. At the end of the fiscal first quarter, net cash provided by operating activities was $77 million compared with $116 million at the end of the year-ago period.

Fiscal 2020 Guidance   

For fiscal 2020, Hill-Rom has raised the lower end of its adjusted EPS guided range to $5.50-5.56 (earlier it was $5.46-5.56).

The Zacks Consensus Estimate for fiscal 2020 earnings stands at $5.53, within the company’s projected band.

However, the company’s revenue expectation for the full fiscal is reiterated in the 1-2% range, both on reported and constant currency basis. Core revenues are envisioned to grow at 4-5% rate (earlier forecast was 5-6%). The Zacks Consensus Estimate for fiscal 2020 revenues is pegged at $2.94 billion.

For second-quarter fiscal 2020, revenues are expected to dip 1-2% from the prior-year figure on reported and CER basis. Core revenue growth is predicted at 4%. The Zacks Consensus Estimate for quarterly revenues is pegged at $721.9 million.

Adjusted earnings for the fiscal second quarter are estimated in the bracket of $1.16-$1.16 per share. The Zacks Consensus Estimate for the same stands at $1.24, above the company’s expected range.

Our Take

Hill-Rom exited fiscal 2020 on a mixed note with better-than-expected earnings and in-line revenues. The company saw a solid year-over-year increase in revenues on robust domestic growth, boosted by sturdy performances in Patient Support Systems. 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.

Zacks Rank and Other Key Picks

Hill-Rom currently has a Zacks Rank #2 (Buy). Some other top-ranked stocks in the broader medical space are SeaSpine Holdings Corporation SPNE, STERIS plc STE and DexCom, Inc. DXCM, all three carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for SeaSpine’s fourth-quarter 2019 revenues is pegged at $43.6 million, suggesting 14.7% growth rate from the prior-year reported figure. The same for loss per share is anticipated at 44 cents, implying a 16.9% improvement from the year-ago reported number.

The Zacks Consensus Estimate for STERIS’s third-quarter fiscal 2020 revenues is pegged at $749.7 million, hinting at a 7.7% increase from the year-earlier reported figure. The same for adjusted earnings per share stands at $1.43, indicating a 13.5% rise from the year-ago reported figure.

The Zacks Consensus Estimate for DexCom’s fourth-quarter 2019 revenues is pegged at $457 million, suggesting 35.2% growth from the prior-year reported figure. The same for adjusted earnings per share stands at 72 cents, implying a 33.3% improvement from the year-earlier reported figure.

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