Hill-Rom (HRC) Hits New 52-Week High: What’s Behind It?

Hill-Rom Holdings HRC hit a new 52-week high of $147.70 on August 30 before ending slightly lower at $145.78. Since announcing fiscal third-quarter results on July 30, the company’s stock has rallied 5.3%.

The company has seen an upward trend in share prices driven by growth in the number of Front Line Care and Surgical Solutions divisions in the third quarter of fiscal 2021. The company’s recent launches, including the Helion integrated surgical system for the US market, are encouraging. The increased financial forecasts for 2021 are also optimistic. However, exchange rate issues and intense competition remain worrisome.

Let’s dig deeper.

Factors at play

Impressive results for the third quarter: Hill-Rom ended fiscal third quarter 2021 with better-than-expected earnings and revenue. Excluding headwinds related to Covid-19, revenues rose 10% at CER, driven by better-than-expected performance across the vast majority of the company’s portfolio. Revenue growth was driven by year-over-year growth in the Front Line Care (led by accelerated recovery of core Welch Allyn products) and Surgical Solutions (led by increased demand for operating tables) segments.

Acquisitions to add value: Hill-Rom’s mergers and acquisitions (M&A) pipeline continues to expand dynamically. With increased balance sheet flexibility, the company is in a strong position to strengthen its category leadership position and continue to grow. Hill-Rom is actively evaluating additional opportunities that align with its vision of connected care, streamline business operations and improve outcomes for patients and caregivers. The company is aggressively pursuing acquisitions to accelerate growth in five key clinical areas: improving patient mobility, wound care and prevention, surgery, safety and efficiency, clinical workflow solutions and respiratory assistance.

In February 2021, Hill-Rom announced the acquisition of contactless continuous monitoring technology from EarlySense in partnership with Augmedics, creator of the groundbreaking xvision Spine System (XVS), the first augmented reality navigation system for use in surgery. In January 2021, Hill-Rom reached a definitive agreement to acquire Bardy Diagnostics, a digital health innovator and leading provider of ambulatory heart monitoring technology.

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Optimistic tips: For fiscal 2021, the company expects reported revenue growth to be in the range of 3% to 4%. This is an improvement compared to the 1-3% growth forecast announced in April.

Adjusted earnings per share are now forecast at $6.08-$6.12 (up from prior guidance of $6.00-$6.10). The company also provided guidance for the fourth quarter of fiscal 2021. Hill-Rom expects revenue to grow 6% to 7% on a reported basis and adjusted earnings, excluding special items, to be in the range of $1.44 to $1.48 per share .

Defects

Wind against currency exchange to continue: Hill-Rom generates a large portion of its revenue from outside the United States. According to the company, it is exposed to currency fluctuations.

Challenging competitive landscape: The presence of a large number of players has made the medical device market very competitive. Hill-Rom evaluates its competition based on product categories, not business segments. In the area of Patient Support Systems, the company competes with, among others, ArjoHuntleigh (a division of Getinge AB), Universal Hospital Services, Inc. and Stryker Corporation. In the Front Line Care area, the most important players include GE Healthcare, Philips and ResMed. In the surgical solutions segment, DeRoyal, Draegar and Skytron are some of the remaining competitors. Additionally, the market consists of a large number of smaller and regional producers.

Zacks Rank and Key Picks

Hill-Rom is currently sporting a Zacks Rank #3 (Hold).

There are several better-ranked companies in the broader healthcare space Envista Holdings Company NVST, BellRing Brands, Inc. BRBR i Henry Schein, Inc. HSIC, each carrying a Zacks Rank #2 (Buy). You can see You can find the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Envista Holdings estimates a long-term earnings growth rate of 27%.

BellRing Brands’ estimated long-term earnings growth rate is 29%.

Henry Schein forecasts a long-term earnings growth rate of 14%.

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