Goldman Sachs Cuts Price Target For Hill-Rom Holdings (HRC)
Friday, January 27, 2022 9:33 AM

Goldman Sachs has reduced its 12-month price target for Hill-Rom Holdings (HRC) to $35 from $36 on lower outer-year EPS estimates.

The brokerage believes that though the first quarter EPS and revenue were in line with preannounced numbers, it found weakness in underlying trends, i.e. gross margins were down sharply year-over-year and the pacing of R&D slowed.

The company guided second quarter EPS to be $0.53 - $0.55 compared to consensus $0.56 and Goldman Sachs estimation of $0.58. Revenues are targeted to rise about 1 percent FXN for the second quarter.

As a result, the brokerage revised its estimates to represent lower sales in NA Acute Care, partly offset by increased sales outside the U.S., lower gross margins due to mix, slightly lower operating costs and higher share buy back. Analyst David Roman believes that the outlook for the rest of the year seems reasonable but still requires improvements in most key markets such as OUS regions.

Goldman Sachs reduced FY2012 revenues estimation to $1.618 billion from $1.623 billion, for FY2013 to $1.686 billion from $1.695 billion and for FY2014 to $1.767 billion from $1.776 billion.

The analyst feels that in the absence of share repurchase, upward revision in guidance is not likely. He maintained Neutral rating.

The brokerage believes that Hill-Rom faces number of headwinds such as gross margins to remain under pressure, after the company announced its long-range plan, it failed to meet revenue growth twice in three quarters and it is still not clear whether the company will materially step up its growth rate going forward. Lastly, despite the company’s view that Europe is stabilizing, the analyst sees environment worsening for capex in the near term.

 The brokerage lists share gains, OUS expansion and cost cutting as key risks for upside, while slowing hospital capex, restructuring efforts and new product delays are viewed for downside risks.