Hill-Rom Holdings, Inc. HRC reported second-quarter fiscal 2015 adjusted earnings per share (EPS) of 64 cents, reflecting a 6.6% rise from the year-ago quarter. Adjusted EPS also surpassed the Zacks Consensus Estimate by 4 cents.
Solid revenue growth in the quarter was primarily responsible for the year-over-year earnings improvement. Including one-time items, the company reported second-quarter fiscal 2015 net earnings per share of 45 cents, considerably improving from the year-ago loss of 6 cents per share.
Revenues increased 14% year over year to $475 million (up 21% at Constant Exchange Rate or CER) and steered ahead of the Zacks Consensus Estimate of $472 million. The upside was driven by solid contribution from the Trumpf Medical acquisition and strong capital revenue growth in North America. Excluding the benefit of Trumpf, the company reported 6% growth at CER.
Domestic revenues jumped 13% to $297 million while revenues outside the U.S. surged 36% to $178 million, both benefiting from the Trumpf acquisition.
Reportable Segments
North America revenues increased 10.8% year over year at CER to $246.9 million. While North America capital sales increased 16%, rental revenues declined 2% (up 5% excluding the impact of the previously exited third party reimbursed home care rental business).
Surgical and Respiratory Care segment showed a robust 98% year-over-year growth at CER to $120 million. This was primarily driven by 1% organic growth at CER and the addition of Trumpf Medical.
Hill-Rom’s international business, however, slipped 0.1% at CER to $107.9 million as the strength in Asia Pacific and Europe was offset by weak business in Middle East and America. Overall, capital revenue was flat while rental revenues increased 2% at CER in this segment.
Margin
Reported gross margin in the first quarter was 45.1%, down 369 basis points (bps) year over year with a 22.5% increase in total cost of revenues. Adjusted gross margin was 45.4%, down 170 bps year over year. Excluding Trumpf, however, adjusted gross margin declined approximately 60 bps.
Adjusted operating margin, on the other hand, declined 80 bps to 11.6% with an increase of 9.1% in adjusted selling and administrative expenses and 26.9% in research and development expenses.
Outlook
Hill-Rom provided an update on its full year 2015 guidance. The company lowered its reported revenue growth expectation to 10% to 11% from the earlier guided 11% to 12%. This revised projection takes into consideration low to mid single-digit organic growth at CER and negative currency impact of approximately 6% compared to 4% estimated previously. The current Zacks Consensus Estimate for revenues remains at $1,887 million.