On Jun 7, we issued an updated research report on Batesville, IN-based medical device manufacturer Hill-Rom Holdings, Inc. (NYSE:HRC) . The company currently carries a Zacks Rank #3 (Hold).
Hill-Rom posted a mixed second quarter of fiscal 2016 with the bottom line surpassing the Zacks Consensus Estimate and the top line missing the same. On the brighter side, the company is reaping significant benefits from the Welch Allyn acquisition as is evident from this business’ contribution to revenues as well as gross margin in the second quarter.
Hill-Rom has set its long-term financial goals (till fiscal 2018) taking the Welch Allyn buyout into consideration. The company projects revenue increase from its organic activities in the range of 3%–5% annually at constant exchange rate with adjusted operating margin expansion likely to be 450–550 basis points (including the benefits from the Welch Allyn acquisition). Adjusted earnings per share (EPS) CAGR is expected in the mid-to-high teens compared with the 2015 EPS figure
Apart from Welch Allyn and Trumpf, several of the company’s recent noteworthy acquisitions include Virtus, Aspen, Surgical and Völker. Each of these transactions has been driving growth for the company.
During the fiscal second quarter, on account of the Welch Allyn buyout, Hill-Rom launched Connex Spot Monitor in the U.S., which is already witnessing strong traction in the domestic market. The company is also rolling out a new product, RetinaVue, which is expected to boost growth.
On the flip side, unfavorable currency movement continues to be a dampener and the company does not expect any improvement any time soon. Hill-Rom also expects foreign exchange to impact its full-year 2016 revenue outlook by approximately 2%–3%.
Moreover, the company witnessed top-line deterioration in most of its overseas businesses, except Asia-Pacific, on account of persistent weakness in the Middle East and Latin America. In addition, competitive and global economic headwinds are the other downsides.
Key Picks in the Sector
Better-ranked medical stocks are Baxter International Inc. (NYSE:BAX) , Boston Scientific Corporation (NYSE:BSX) and LeMaitre Vascular, Inc. (NASDAQ:LMAT) . All the three stocks carry a Zacks Rank #2 (Buy).
BOSTON SCIENTIF (BSX): Free Stock Analysis Report
BAXTER INTL (BAX): Free Stock Analysis Report
LEMAITRE VASCLR (LMAT): Free Stock Analysis Report
HILL-ROM HLDGS (HRC): Free Stock Analysis Report
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