Hillenbrand Inc . (NYSE: NYSE:HI) has seen a shift in stock rating as DA Davidson lowered its stance from Buy to Neutral. The firm also revised the price target for the company's shares, which has been set at $33.00, a decrease from the previous target of $54.00.
The adjustment comes as the analyst noted a decrease in expected earnings for fiscal years 2024 and 2025.
The downgrade was attributed to a continued weakness in mid-sized project bookings within the company's Advanced Process Solutions (APS) segment and a persistent sluggishness in the Molding Technology Solutions (MTS) division.
These factors are anticipated to pose challenges for Hillenbrand in achieving earnings per share (EPS) growth in FY25. The analyst pointed out that this outlook is largely in line with the consensus view.
Moreover, the lack of firm orders is expected to result in a corresponding decline in down payments. This situation is likely to impact the company's free cash flow (FCF) negatively and delay the process of balance sheet deleveraging. The analyst expressed difficulty in identifying a near-term catalyst that could lead to a higher valuation of Hillenbrand's shares.
Hillenbrand's earnings and revenue results have shown significant developments. The company reported a 14% increase in total revenue in its second quarter of fiscal year 2024, largely due to the acquisition of Schenck Process Food and Performance Materials business.
However, Hillenbrand has updated its full-year revenue forecast to $3.2 billion to $3.3 billion, with adjusted EBITDA between $512 million and $536 million, and adjusted EPS of $3.30 to $3.50.
Meanwhile, KeyBanc has initiated an Overweight rating on Hillenbrand's stock, recognizing the company's transformation and potential for stock value increase. The firm anticipates investors gaining confidence as Hillenbrand demonstrates progress and the operating environment normalizes. Also, DA Davidson has maintained a Buy rating on Hillenbrand, despite acknowledging broader macroeconomic challenges.
InvestingPro Insights
Recent data from InvestingPro shows a mixed picture for Hillenbrand Inc. The company is trading near its 52-week low, with the price at the previous close standing at $35.99, which is in line with the analyst's concerns about the stock's valuation. Despite the challenges, Hillenbrand has a history of consistent dividend payments, having raised its dividend for 16 consecutive years and maintained payments for 17 years, which may appeal to income-focused investors. The dividend yield as of the last data point stands at a solid 2.47%.
On the growth front, while the company has been not profitable over the last twelve months, analysts are predicting a return to profitability this year. This aligns with the company's revenue growth over the last twelve months as of Q3 2024, which was reported at 16.53%. However, the significant debt burden and recent poor stock performance, with a 1-month price total return of -15.67%, are factors investors should consider. For those looking for more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/HI.
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