Hillenbrand (HI)

Industrial processing equipment and solutions provider Hillenbrand (NYSE:HI) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, but sales fell by 23.9% year on year to $598.9 million. The company’s full-year revenue guidance of $2.61 billion at the midpoint came in 1.1% above analysts’ estimates. Its non-GAAP profit of $0.51 per share was 3% above analysts’ consensus estimates.

Company Overview

Hillenbrand, Inc. (NYSE: HI) is an industrial company that designs, manufactures, and sells highly engineered processing equipment and solutions for various industries.

Automation that increases efficiency and connected equipment that collects analyzable data have been trending, creating new demand for general industrial machinery companies. Those who innovate and create digitized solutions can spur sales and speed up replacement cycles, but all general industrial machinery companies are still at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors offering similar products include Matthews (NASDAQ:MATW), EnPro (NYSE:NPO), and Valmont (NYSE:VMI)

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Hillenbrand’s sales grew at a sluggish 4.4% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Hillenbrand’s annualized revenue growth of 3.5% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

This quarter, Hillenbrand’s revenue fell by 23.9% year on year to $598.9 million but beat Wall Street’s estimates by 4.6%.

Looking ahead, sell-side analysts expect revenue to decline by 15.5% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Hillenbrand’s gross margin is good compared to other industrials businesses and signals it sells differentiated products, not commodities. As you can see below, it averaged an impressive 33.9% gross margin over the last five years. Said differently, Hillenbrand paid its suppliers $66.08 for every $100 in revenue.

In Q2, Hillenbrand produced a 33.8% gross profit margin, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Hillenbrand has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 12.5%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Hillenbrand’s operating margin decreased by 4.9 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Hillenbrand generated an operating margin profit margin of 9.4%, down 1.6 percentage points year on year. Since Hillenbrand’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Hillenbrand’s flat EPS over the last five years was below its 4.4% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

Diving into the nuances of Hillenbrand’s earnings can give us a better understanding of its performance. As we mentioned earlier, Hillenbrand’s operating margin declined by 4.9 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Hillenbrand, its two-year annual EPS declines of 11.7% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.

In Q2, Hillenbrand reported adjusted EPS at $0.51, down from $0.85 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 3%. Over the next 12 months, Wall Street expects Hillenbrand’s full-year EPS of $2.68 to shrink by 10.4%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Hillenbrand has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 7.1% over the last five years, slightly better than the broader industrials sector.

Taking a step back, we can see that Hillenbrand’s margin dropped by 16.6 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Hillenbrand’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 10.7%, slightly better than typical industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Hillenbrand’s ROIC has unfortunately decreased. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Hillenbrand reported $162.8 million of cash and $1.68 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $424 million of EBITDA over the last 12 months, we view Hillenbrand’s 3.6× net-debt-to-EBITDA ratio as safe. We also see its $55.7 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Hillenbrand blew past analysts’ revenue expectations this quarter. We were also glad its full-year EBITDA guidance slightly exceeded Wall Street’s estimates. On the other hand, its EBITDA slightly missed. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 1% to $20 immediately after reporting.

Updated: November 11, 2025 at 10:22 PM EST

Before making an investment decision, investors should account for Hillenbrand’s business fundamentals and valuation in addition to what happened in the latest quarter.

We see the value of companies helping their customers, but in the case of Hillenbrand, we’re out. For starters, its revenue growth was uninspiring over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its sturdy operating margins show it has disciplined cost controls, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its projected EPS for the next year is lacking.

Hillenbrand’s P/E ratio based on the next 12 months is 13x. This valuation multiple is fair, but we don’t have much confidence in the company. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $32 on the company (compared to the current share price of $31.66).