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Hill-Rom's (HRC) Q4 Earnings Beat on Strong Global Sales

Zacks Equity Research

Hill-Rom Holdings, Inc. HRC reported fourth-quarter fiscal 2019 adjusted earnings per share (EPS) of $1.69 excluding certain special items. The figure improved 4.3% from the year-ago quarter and also surpassed the Zacks Consensus Estimate by 2.4%.

Further, full-fiscal adjusted EPS was $5.08, reflecting 6.9% growth from the year-ago period.

Additionally, revenues in the fiscal fourth quarter came in at $782.8 million, up 3.1% from the year-ago period. The top line also beat the Zacks Consensus Estimate by 3.2%. Revenues of $2.91 billion in fiscal 2019 rose 2.1% from fiscal 2018.

Geographically, in the reported quarter, U.S. revenues grew 4% while the metric outside the United States inched up 0.8% (up 4.3% at constant exchange rate or CER). Core revenue growth (after excluding foreign currency, divestitures and non-strategic assets that the company may exit including the Surgical Solutions international OEM business) was 8%, exceeding the company’s guidance of 5% growth.

Segment Details

In the quarter under review, Patient Support Systems revenues rose 10% year over year (up 11% at CER) to $415 million. This segment’s core revenues were up 14%, representing strength across the diversified portfolio of connected solutions and services including double-digit growth of care communication platforms and med-surg bed systems.

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 dipped 2% to $257 million (down 1% at CER). According to the company, a difficult comparison in the reported quarter due to the year-ago launch of the Monarch Airway Clearance System in the United States, offset strong growth in other respiratory health products and certain diagnostic tools including thermometry and the vision portfolio.

The Surgical Solutions segment’s revenues declined 8% (down 6% at CER) to $110 million, affected by surgical revenue divestiture. However, core revenues increased 11% on strong growth of patient positioning and operating room equipment including Integrated Table Motion for the da Vinci Xi Surgical System.

Cash Position

The company exited fiscal 2019 with cash and cash equivalents of $214.1 million compared with $183 million at the end of fiscal 2018. For the full fiscal, net cash provided by operating activities was $4301.1 million compared with $395.2 million at the end of the previous fiscal.

Fiscal 2020 Guidance   

Hill-Rom has initiated its fiscal 2020 outlook. Adjusted EPS is expected in the $5.46-5.56 band excluding special items. The Zacks Consensus Estimate for fiscal 2020 earnings stands at $5.48, within the company’s guided range.

The company’s revenue expectation for the full fiscal is projected in the 1-2%range, both on reported and constant currency basis. Core revenues are projected to grow at 4-5% rate. The Zacks Consensus Estimate for fiscal 2020 revenues is pegged at $2.92 billion.

For first-quarter fiscal 2020, revenues are expected to be flat with the prior-year figure on reported and CER basis. Core revenue growth is predicted at 5-6%. The Zacks Consensus Estimate for quarterly revenues is pegged at $685.23 million.

Adjusted earnings in the fiscal first quarter are estimated in the range of $1.07-$1.09 per share. The Zacks Consensus Estimate for the same stands at $1.09, same as the upper end of the company’s expected range.

Our Take

Hill-Rom exited fiscal 2019 on a strong note with better-than-expected results. The company saw a solid year-over-year increase in revenues on robust domestic growth, driven by sturdy performances in Patient Support Systems. Internationally, Asia Pacific, Latin America and EMEA registered strong revenue growth.

On the flip side, sales in Surgical Solutions’ dropped significantly, thanks to the divestiture of surgical consumables.

Zacks Rank and Key Picks

Hill-Rom currently has a Zacks Rank #3 (Hold). Some better-ranked medical device companies, which posted solid results this earnings season, are ResMed Inc RMD, NuVasive, Inc NUVA and Thermo Fisher Scientific Inc TMO.

ResMed carries a Zacks Rank #2 (Buy). It reported first-quarter fiscal 2020 adjusted EPS of 93 cents, surpassing the Zacks Consensus Estimate by 6.9%. Its revenues of $681.1 million also outpaced the consensus mark by 3.7%.

NuVasive’s third-quarter 2019 adjusted EPS of 59 cents surpassed the Zacks Consensus Estimate by 9.3%. Its revenues of $290.8 million exceeded the consensus estimate by 2.4% as well. The stock currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher is currently a Zacks #2 Ranked stock. The company delivered third-quarter 2019 adjusted EPS of $2.94, beating the Zacks Consensus Estimate by 2.1%. Moreover, its revenues of $6.27 billion topped the Zacks Consensus Estimate by 1.3%.

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