KeyBanc Capital Markets analyst Jeffrey D. Hammond initiated coverage on Hillenbrand Inc (NYSE:HI) with a price forecast of $50.
Per Hammond, HI shares are discounting the significant transformation the company has made over the last two years, and despite near term cyclical concerns, the analyst sees a path for HI shares to re-rate higher.
As the company proves its FY24 framework and enters a more normalized operating environment, investors will become more comfortable with the new and improved HI, the analyst adds.
During FY23 and early FY24, the analyst observes a slowdown in short-cycle hot-runners, with a higher proportion of longer-cycle, lower-margin injection molding machines impacting margins unfavorably.
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This trend is expected to reverse through the remainder of FY24, approaching long-term targets by FY26.
While current cyclical dynamics remain choppy, the analyst sees signs of leading indicators coming off trough levels, which should begin to show through on the MTS business and its implied F2H24 ramp.
All in, while somewhat concerned about the cycle, the analyst projects that HI will ultimately be able to achieve its updated FY guide, which will set the stage for momentum into FY25.
In a press release dated April 30, HI had said it expects adjusted EPS of $3.30 – $3.50 (prior view: $3.60 – $3.95). The analyst sees FY24 EPS of $3.35, with revenues of $3.253 billion.
Price Action: HI shares are trading higher by 6.79% to $40.56 at last check Wednesday.
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