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Here's Why You Should Add Hill-Rom Stock To Your Portfolio

Published 03/23/2020, 11:02 PM
Updated 07/09/2023, 06:31 AM

Hill-Rom Holdings, Inc. (NYSE:HRC) has been gaining from the majority of its segments domestically as well as globally. The company’s robust pipeline as well as its progress in the Digital Health space buoys optimism. A positive demographic trend is an added advantage.

Over the past year, shares of the Zacks Rank #2 (Buy) company have lost 22.3% compared with the industry’s 29.9% decline.

The renowned global medical device provider has a market capitalization of $5.02 billion. The company projects 11.1% growth for the next five years and expects to maintain its strong performance. Further, it delivered a positive earnings surprise of 2.9%, on average, over the trailing four quarters.

Let’s delve deeper.

Impressive Q1 Results: We are upbeat about the company’s better-than-expected earnings and in-line revenues. It witnessed a solid year-over-year increase in revenues on robust domestic growth, boosted by sturdy performances in Patient Support Systems. The company’s core revenues also improved on strong growth of surgical workflow equipment, including Integrated Table Motion for the da Vinci Xi Surgical System.

Robust sales of Hill-Rom's care communications and mobile offerings as well as med-surg and specialty bed systems, including the Centrella Smart+Bed, buoy optimism. Broad-based global strength across Welch Allyn vital signs monitoring equipment, respiratory health products and the vision portfolio led to further revenue uptick. An upbeat earnings guidance for 2020 instills investor optimism as well.

Partnership and Acquisitions: We are optimistic about Hill-Rom’s recently signed exclusive, year-long partnership with The UK Sepsis Trust to spread greater awareness about sepsis.

Hill-Rom’s acquisition of mobile healthcare communication player, Voalte, already started to accelerate its digital and mobile communications platform’s capabilities and scale, with a substantial installed customer base. Hill-Rom’s acquisition of Breathe Technologies in the second half of fiscal 2019 created an opportunity to leverage Hill-Rom’s vertically integrated commercial model. Currently, Hill-Rom is on track to re-launch the Breathe Life2000 device.

Potential in Digital Health Space: We are upbeat about the company’s recently launched smartphone application — Linq mobile. Per Hill-Rom, the platform integrated Clinical Workflows with Nurse Call and clinical surveillance, with monitoring systems to enhance care team communication and efficiency.

Further, Hill-Rom recently acquired Excel Medical to improve clinical workflow, provide greater access and assimilation of real-time patient data and predictive analytics with a vendor-neutral interoperable solution. Hill-Rom partnered with Microsoft (NASDAQ:MSFT) to bring together Hill-Rom's extensive clinical knowledge and streaming operational data from medical devices, and Microsoft's cloud, including Azure IoT and Azure Machine Learning. All these were completed to strengthen Hill-Rom’s position in the Digital Health space.

However, despite the company’s upside potential, downsides might result from its heavy dependency on general domestic and global economic conditions. Over the past several years, the credit and capital markets have experienced extreme volatility and disruptions, leading to phases of recessionary conditions, and depressed levels of consumer and commercial spending. Another headwind trailing the company is the stiff competition it faces in the medical devices market from biggies like Stryker Corporation (NYSE:SYK) as well as smaller and regional manufacturers.

Estimate Trend

Hill-Rom is witnessing a positive estimate revision trend for 2020. Over the past 60 days, the Zacks Consensus Estimate for its earnings has moved 0.4% north to $5.55.

The Zacks Consensus Estimate for Hill-Rom’s fiscal 2020 revenues is pegged at $2.94 billion, suggesting a 1% rise from the year-ago reported number.

Other Key Picks

Some other top-ranked stocks from the broader medical space are ResMed Inc. (NYSE:RMD) , Medtronic plc (NYSE:MDT) and QIAGEN N.V. (NYSE:QGEN) .

ResMed has a projected long-term earnings growth rate of 14.4%. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Medtronic’s long-term earnings growth rate is estimated at 7.1%. The company presently carries a Zacks Rank #2.

QIAGEN’s long-term earnings growth rate is estimated at 10%. It currently carries a Zacks Rank #2.

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ResMed Inc. (RMD): Free Stock Analysis Report

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Hill-Rom Holdings, Inc. (HRC): Free Stock Analysis Report

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