Hill-Rom Holdings (NYSE:HRC) delivered tremendous gains for investors last year, with the medical technology stock soaring 28%. And it achieved this performance without posting splashy revenue and earnings improvement.

There also wasn't a lot of splash when Hill-Rom announced its fiscal year 2020 first-quarter results before the market opened on Friday. But those results were better than they might appear at first glance. Here are the highlights from the company's Q1 update.

First-quarter key on keyboard

Image source: Getty Images.

By the numbers

Hill-Rom announced Q1 revenue of $685 million, up slightly from the $683.5 million reported in the same quarter of the previous year. This result also narrowly topped the average analyst revenue estimate of $684 million.

The company reported first-quarter net income of $39.8 million, or $0.59 per share, based on generally accepted accounting principles (GAAP). This represented a decrease from net income of $42.2 million, or $0.62 per share, in the prior-year period. 

Hill-Rom posted adjusted net income of $1.13 per share, compared to $1.02 per share in the same period in 2019. This easily beat the average analyst adjusted earnings estimate of $1.08 per share.

Behind the numbers

Hill-Rom CEO John Groetelaars said, "We are pleased to report another quarter of strong financial results driven by our diverse portfolio and successful execution of our strategic priorities." Year-over-year revenue growth of well below 1% wouldn't be viewed as "strong financial results" by most investors, but there was a key reason behind the company's flat revenue: Hill-Rom sold its surgical consumables business last year.

A better figure to look at for year-over-year comparisons is Hill-Rom's core revenue, which excludes currency fluctuations and divestitures. The company's core revenue increased by 6% year over year in the first quarter, at the upper end of its guidance range.

Hill-Rom's biggest unit, patient support systems, generated revenue of $344 million in Q1, up 1% from the prior-year period. U.S. sales were especially strong, with core revenue jumping 8% thanks largely to increased adoption of the company's care communications and mobile products.

The company saw even stronger revenue growth from its frontline car business, with sales rising 9% year over year to $255 million. This growth was driven by continued momentum worldwide for its Welch Allyn vital signs monitoring systems and other products.

Surgical solutions revenue fell 21% from the prior-year period to $86 million. However, this decline stemmed from the divestiture of the company's surgical consumables unit. Surgical solutions core revenue increased by 9%, fueled in part by strong customer demand for Hill-Rom's Integrated Table Motion workflow product for Intuitive Surgical's da Vinci Xi robotic surgical system.

Looking ahead

Hill-Rom expects revenue for full-year 2020 to increase by 1% to 2%. The company anticipates adjusted non-GAAP earnings per share to be between $5.50 and $5.56. Hill-Rom also projects that Q2 revenue will decline by 1% to 2%, with adjusted earnings per share coming in between $1.14 and $1.16.

Groetelaars said that the company's "category leadership strategy, new products, emerging market opportunities and benefits from recent acquisitions position us well to drive sustainable growth, deliver on our financial outlook and enhance outcomes for patients and their caregivers."

One key thing for investors to watch with respect to Hill-Rom's prospects this year, though, is the upcoming U.S. election in November. With several leading presidential candidates proposing major changes to the U.S. healthcare system, healthcare stocks like Hill-Rom could be more volatile than they've been in recent years.