UPDATE: Morgan Stanley Reiterates Underweight Rating, Removes PT on Hill-Rom Holdings as End-Market Pressure Remains

In a report published Friday, Morgan Stanley analyst David R. Lewis reiterated an Underweight rating on Hill-Rom Holdings HRC, but removed the $36.00 price target. In the report, Morgan Stanley noted, “Sales remained pressured in F2Q14, declining 3% on a -8% comp, stable sequentially on a comp-adjusted basis. This is consistent with the end-market pressures we discussed in our November 11 downgrade report, End-market Pressure Too Great; Downgrading to UW. Hill-Rom's earnings beat was driven by better than expected operating margins, which increased y/y for the first time in six quarters. While guidance for the year remained mostly unchanged after adjusting for Hill-Rom's exit of the home care business, F3Q14 guidance was below street and MS expectations. We continue to believe that the company's structurally weak capital end-markets will cause slower growth and more volatile results than peers, and given headwinds from growth, mix, and quality spending, Hill-Rom's Long-Range Plan of 300-400 bps of EBIT margin expansion may prove challenging.” Hill-Rom Holdings closed on Thursday at $37.29.