Hill-Rom outlines three-year plan for earnings growth, updates guidance

By Lisa Kerner

Charlotte, N.C., Sept. 25 – Hill-Rom Holdings, Inc. executives discussed the company’s strategies and key initiatives to generate longer-term revenue and earnings growth over the next three years during a conference call on Friday.

The company, among other strategies, plans to invest in research and development, leverage its global sales channel and optimize its manufacturing footprint.

President and chief executive officer John Greisch said he is confident the company can drive a targeted topline revenue growth of 3% to 5% through 2018. Hill-Rom’s 2015 combined revenue base, including the recently acquired Welch Allyn Inc., is $2.6 billion.

Hill-Rom is targeting a 450 to 550 basis points improvement to its adjusted operating margin in part through operational improvements and by the immediately accretive addition of Welch Allyn.

Greisch also expressed confidence in Hill-Rom’s cash flow and said the company will have a stronger opportunity “to improve and deliver consistent sustainable operating cash flow to use for both delevering in the near term and also to continue to evolve our portfolio, both through M&A and other organic investments, as we go forward.”

Full-year cash flow is expected to be about $235 million.

“Operating cash flow will exceed $400 million by year three, and we expect to generate over $1 billion of cumulative operating cash flow over these next three years,” senior vice president and chief financial officer Steve Strobel said on the call.

The Chicago-based medical technology company plans to reduce its 4.5 times leverage to three times by 2018, according to the presentation.

Guidance update

Hill-Rom updated its 2015 financial guidance following completion of the Welch Allyn transaction on Sept. 8.

Fiscal 2015 revenue is expected to be in the range of $1.96 billion to $1.97 billion. Fourth-quarter revenue is expected to be between $545 million and $555 million.

Adjusted earnings per share for the full year are expected to be in the range of $2.55 to $2.57, compared with $2.51 to $2.54 previously. For the quarter, adjusted EPS is expected to be $0.80 to $0.82, compared with $0.76 to $0.79 previously.

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