January 11, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of medical equipment company Hill-Rom Holdings (NYSE: HRC ) sank 11% today after lowering its current-quarter and full-year guidance.
So what: While international orders are improving, continued weakness in Hill-Rom's North American acute care business, coupled with the loss of a research and development tax credit, is forcing analysts to lower their valuation estimates yet again. In fact, the shares are steadily approaching their 52-week lows on the news.
Now what: For the full-year 2012, management sees EPS of $2.45-$2.50 on 3%-4% revenue growth, which is down slightly from its prior view of $2.45-$2.55 in EPS on revenue growth of 4%-5%. "Given the uncertainty in the market, we expect continued unevenness in our quarterly revenue," CEO John Greisch said. "We are confident, however, in our ability to deliver our revised guidance for the year and will continue to aggressively manage our cost structure to mitigate the impact of lower projected revenues." Given Hill-Rom's beaten down price, reasonable forward P/E, and decent dividend yield, buying into that plan might not be such a bad idea.
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