Hill-Rom Rides On New Products, Asia Pacific Sales Drop

On Nov 16, we issued an updated research report on Hill-Rom Holdings, Inc. (NYSE:HRC) . Post the company’s completion of $2.05-billion acquisition of Welch Allyn, the company now boasts a significantly larger global reach with operations across 30 countries worldwide. The stock carries a Zacks Rank #3 (Hold).

Shares of Hill-Rom have outperformed the broader industry in the past month. The stock has so far gained 9.5% compared with the industry's 0.1% increase.

Notably, Hill-Rom exited the fiscal 2018 on a strong note with fourth-quarter earnings and revenues beating the respective Zacks Consensus Estimate. Adjusted earnings increased 23% in the reported quarter, marking the 13th consecutive period of double-digit growth. The company saw a solid increase in revenues on robust domestic growth, driven by a sturdy performance in Patient Support Systems and Front Line Care.

Full-year international core revenues were strong. Europe, Canada and the Middle East collectively grew in high-single digits. The company is currently focusing on product innovation.

For the full year, it has achieved more than $300 million as new product revenues. In 2019, the company expects to generate above $400 million in new product revenues, exceeding its 2020 objective a year in advance. Hill-Rom plans to expand its global reach with the launch of Centrella in the Middle East and Australia during 2019.

Accordingly, the company is concentrating on product innovation.In patient support systems, the company launched Hill-Rom Envella Air Fluidized Therapy Bed. Within the respiratory care business, it introduced the Monarch Airway Clearance System. The company also recently announced the upgrade of its Welch Allyn Spot Vision Screener.

Additionally, Hill-Rom's merger and acquisition activities are showing great results. The company actively pursues buyouts to accelerate growth across five key clinical areas such as patient mobility, wound care and prevention, surgical, safety and efficiency, clinical workflow solutions as well as respiratory help. Apart from Welch Allyn and Trumpf, the recent noteworthy transactions include integrations of Virtus, Aspen Surgical and Mortara Instrument among others.

On the flip side, international revenues suffered a decline due to a dip in sales with regard to the Asia-Pacific region. Hill-Rom operates in a highly competitive space, dominated by large and small as well as local manufacturers. Also, an unfavorable currency movement persists to be a menace to the company since a large chunk of its revenues is drawn from international operations.

Key Picks

A few better-ranked stocks in the broader medical space are Stryker Corporation (NYSE:SYK) , Masimo Corporation (NASDAQ:MASI) and Veeva Systems (NYSE:VEEV) .

Stryker has an expected long-term earnings growth rate of 10% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Masimo’s long-term earnings growth rate is projected at 14.6%. The stock carries a Zacks Rank of 2.

Veeva Systems’ long-term earnings growth rate is estimated at 19.3%. The stock is a Zacks #2 Ranked player.

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