Diversified manufacturer Hillenbrand (NYSE: HI) grew revenue and topped earnings expectations in its most recent quarter but warned of a slowdown up ahead. Investors are forward looking, sending the company's stock down 14% as of 12:30 p.m. ET Wednesday.
Pricing pressure and reduced volumes
Hillenbrand is perhaps best known as the parent of casket-maker Batesville, but the company also has a large plastics and molding technology unit that makes industrial products for a range of end markets.
The company earned $0.76 per share in the quarter, a penny above the consensus estimate, despite revenue that came in about $25 million short of expectations at $785.3 million. Revenue was up 14% year over year, including acquisitions, though organic revenue was down 5% due to lower volumes in its molding business.
Hillenbrand is working to cut costs in the molding business, announcing that a restructuring program initially expected to yield $15 million in annual savings is now expected to generate a $20 million reduction in annual costs.
The rest of the year is not looking as strong as the company had once hoped. Hillenbrand reduced its forecast for full-year revenue to a range of $3.23 billion to $3.3 billion, down from $3.28 billion to $3.44 billion, and slashed its forecasted adjusted EBITDA growth for the year.
The company said the changes reflect reduced volumes due to lower-than-expected orders and both pricing pressure and unfavorable product mix in its molding business. Free cash flow for the year is now expected to come in between $130 million and $150 million, down from previous expectations of $230 million.
Is Hillenbrand stock a buy after its earnings miss?
This is a period of uncertainty for a lot of industrial manufacturers, with end users nervously watching the health of the economy and pausing on large, capital-intensive expansions. In this environment, there is little Hillenbrand can do other than mind its own costs, which the company is attempting to do with the restructuring of its molding business.
Hillenbrand shares have largely gone nowhere over the past five years, and until there is more certainty about the economy, the stock seems unlikely to rebound higher. Investors buying in today do get a 2.2% dividend yield in return for their patience, but given the uncertainty of the macro environment this is one better watched from the sidelines.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
