Hill-Rom Holdings, Inc. HRC has been gaining on robust international growth, boosted by strength in majority of segments and geographies. Its impressive results in third-quarter fiscal 2020 buoy optimism. However, macroeconomic headwinds and a tough competitive landscape are concerning.
Over the past year, the Zacks Rank #3 (Hold) stock has lost 22% versus the industry’s 2.6% fall and the S&P 500’s 11.1% rise.
The renowned global medical device provider has a market capitalization of $5.47 billion. The company projects 5.9% growth for the next five years and expects to maintain its strong performance. The company surpassed estimates in all of the trailing four quarters, the average surprise being 13.69%.
Let’s delve deeper.
Acquisitions and Partnerships to Add Value: We are upbeat about Hill-Rom’s several acquisitions in the past few months. Recent notable acquisitions include that of Connecta Soft, S.A. de C.V. and Videomed S.r.l (completed during the third quarter of fiscal 2020) and Excel Medical (completed in the fiscal second quarter). Earlier, the company acquired Breathe Technologies, a developer and manufacturer of a patented nasal cannula technology that enables improved patient mobility.
In the fiscal third quarter, Hill-Rom entered into a partnership with Aiva, Inc., to facilitate hands-free voice-enabled communication on the Voalte Mobile solution.
Product Launches: Hill-Rom has been on a roll for the past few months with respect to product launches. The company, in July, launched two respiratory therapy devices — the Volara System, which provides hospital-grade oscillation and lung expansion therapy, and the Synclara Cough System.
In June, Hill-Rom launched its Extended Care Solution, which is a new and connected remote vital signs monitoring device allowing clinicians to shift care closer to home. Another notable innovative product introduced by the company in the fiscal third quarter is the PST 500, a precision surgical table providing a wide range of positions across various surgical applications.
Strong Q3 Results: Hill-Rom’s better-than-expected results for third-quarter fiscal 2020 buoy optimism. The robust international growth in the third quarter of fiscal 2020 was boosted by strength in majority of segments and geographies. The pandemic-led surge in product demand and product launches looks impressive. Expansion of both margins buoys optimism. Long-term growth plans and M&A pipeline boost optimism. Focus on expansion via product innovation also looks impressive.
Macroeconomic Headwinds: As Hill-Rom’s business depends heavily on general domestic and global economic conditions, economic turmoil is a concern for the company. The credit and capital markets have experienced extreme volatility and disruption over the past several years. This has led to phases of recessionary conditions and depressed levels of consumer and commercial spending, causing customers to reduce or delay plans of purchasing Hill-Rom’s products and services. This leads to a slowdown in the company’s growth rate in the market.
Stiff Competition: Hill-Rom competes with a large number of players. It evaluates its competition based on its product categories rather than business segments. Additionally, the market consists of a large number of smaller and regional manufacturers.
Hill-Rom has been witnessing a negative estimate revision trend for 2020. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 0.2% south to $5.44.
The Zacks Consensus Estimate for its fourth-quarter fiscal 2020 revenues is pegged at $697.3 million, suggesting a 10.9% decline from the year-ago number.
Some better-ranked stocks from the broader medical space are QIAGEN N.V. QGEN, Thermo Fisher Scientific Inc. TMO and Hologic, Inc. HOLX.
QIAGEN’s long-term earnings growth rate is estimated at 22.3%. It currently flaunts a Zacks Rank #1. (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Thermo Fisher’s long-term earnings growth rate is estimated at 15.5%. It currently carries a Zacks Rank #2 (Buy).
Hologic’s long-term earnings growth rate is estimated at 16.4%. The company presently sports a Zacks Rank #1.
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