HI Q1 Earnings Call: Tariffs and Order Delays Drive Lower Outlook Amid Portfolio Transformation
Industrial processing equipment and solutions provider Hillenbrand (NYSE:HI) reported Q1 CY2025 results beating Wall Street's revenue expectations , but sales fell by 8.8% year on year to $715.9 million. On the other hand, next quarter's revenue guidance of $576 million was less impressive, coming in 5.4% below analysts' estimates. Its non-GAAP profit of $0.60 per share was 11.5% above analysts' consensus estimates.
Is now the time to buy HI? Find out in our full research report (it's free).
Revenue: $715.9 million vs analyst estimates of $691 million (8.8% year-on-year decline, 3.6% beat)
Adjusted EPS: $0.60 vs analyst estimates of $0.54 (11.5% beat)
Adjusted EBITDA: $98.8 million vs analyst estimates of $96.98 million (13.8% margin, 1.9% beat)
The company dropped its revenue guidance for the full year to $2.59 billion at the midpoint from $2.71 billion, a 4.4% decrease
Management lowered its full-year Adjusted EPS guidance to $2.28 at the midpoint, a 13.3% decrease
EBITDA guidance for the full year is $379 million at the midpoint, below analyst estimates of $402.4 million
Operating Margin: 8.5%, down from 10.6% in the same quarter last year
Free Cash Flow was -$8 million compared to -$32.9 million in the same quarter last year
Backlog: $1.65 billion at quarter end
Market Capitalization: $1.6 billion
Hillenbrand's first quarter results were shaped by persistent macroeconomic uncertainty and the impact of escalating tariffs, which the company identified as the main drivers behind slower order conversion and an 8.8% year-over-year decline in sales. CEO Kimberly Ryan noted that, despite these headwinds, the company delivered revenue and non-GAAP earnings above Wall Street expectations due to disciplined cost control and continued demand in food, health, and nutrition segments. She explained, 'Our teams delivered revenue of $716 million and adjusted earnings per share of $0.60 per share, ahead of our expectations coming into the quarter, but as expected, down versus the prior year due to lower starting backlog position.'
Looking ahead, management lowered full-year revenue and profit guidance, citing ongoing delays in customer investment decisions linked to tariff uncertainty and dampened business confidence. Ryan was cautious on the near-term environment, stating, 'This unpredictable environment has resulted in delays in our customers' investment plans, with many taking a wait-and-see approach at this time.' The company expects the challenging conditions to persist into the next several quarters and has incorporated $15 million in direct tariff costs into its updated outlook.
Hillenbrand's management attributed the quarter's revenue shortfall and lower operating margins primarily to external pressures from tariffs and a slowdown in customer investments, while highlighting recent portfolio changes and operational actions designed to position the company for long-term growth.
Portfolio realignment: The divestiture of a majority stake in the Milacron injection molding and extrusion business marks a strategic shift, refocusing Hillenbrand on core processing technologies serving less cyclical end markets such as food, health, and performance materials.
Tariff headwinds: Management emphasized that the rapid escalation of tariffs, particularly between the U.S. and China, led to project delays and caused large multinational customers to pause orders, especially in the company's Advanced Process Solutions (APS) segment and the Molding Technology Solutions (MTS) segment.
Stable aftermarket and service demand: Despite broader market weakness, the company reported steady demand for aftermarket parts, services, and refurbishment, which provided a profitable and more predictable revenue base during the quarter, especially as customers prioritized maintenance over new investments.
Cost control and footprint consolidation: The company accelerated cost reductions and continued consolidating manufacturing sites to offset inflation and volume declines. CFO Robert VanHimbergen cited ongoing procurement improvements and dual sourcing strategies as key to near-term cost mitigation.
Synergy capture and integration progress: Management reported that integration of recent acquisitions within the food, health, and nutrition businesses is ahead of schedule, with cross-functional teams accelerating commercial and operational synergies. This integration was described as a foundation for future growth once the external environment stabilizes.
Management's outlook for the remainder of the year centers on persistent uncertainty from tariffs and delayed customer investments, with focus on cost control, portfolio streamlining, and selective growth in resilient end markets.
Tariff mitigation tactics: The company's forecast incorporates $15 million in direct tariff costs but expects to partially offset these through alternative sourcing, targeted price surcharges, and contract adjustments, particularly within the APS segment.
Order pipeline conversion risk: Management warns that continued delays in large project orders and slow quote-to-order conversion—attributed to macro uncertainty—pose a risk to near-term revenue and backlog, especially for engineered plastics and large equipment.
Portfolio simplification and deleveraging: Proceeds from the sale of non-core assets like TerraSource Global are earmarked for debt reduction, which is expected to improve the company's leverage profile and increase flexibility for future investments once demand returns.
Matt Summerville (D.A. Davidson): Asked about order trends and how tariffs affected project timing. Management explained that orders remained stable until late in the quarter, when tariff escalation caused several large projects to be postponed, especially in food, health, and nutrition.
John Franzreb (Sidoti & Company): Inquired about which cost mitigation levers would have the greatest near-term impact against tariffs. CFO VanHimbergen replied that dual sourcing and targeted price surcharges would provide the fastest relief, particularly in APS.
Jeffrey Hammond (KeyBanc Capital Markets): Questioned why Hillenbrand's pricing response to tariffs was more targeted than broader industry price actions. CEO Ryan explained that demand softness and competitive pressures made broad price increases difficult, especially in the MTS segment.
Dan Moore (CJS Securities): Requested updates on the aftermarket and service business as a stabilizer in the current environment. VanHimbergen reported that break-fix aftermarket sales held up well, but new equipment-linked parts orders were delayed.
Dan Moore (CJS Securities): Also asked about the timing of order recovery needed for revenue growth in 2026. Management indicated orders for large projects must improve by the end of this year to avoid further revenue declines next year.
Looking forward, the StockStory team will focus on (1) the pace at which delayed project orders in food, health, and performance materials begin to convert, (2) the effectiveness of Hillenbrand's tariff mitigation strategies and cost-reduction efforts, and (3) the execution and timing of asset sales such as TerraSource Global and the resulting impact on the company's balance sheet. Progress in integrating recent acquisitions and sustaining aftermarket demand will also be key markers of operational resilience.
Hillenbrand currently trades at a forward P/E ratio of 8.8×. Is the company at an inflection point that warrants a buy or sell? See for yourself in our free research report.
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