Oppenheimer starts Hill-Rom Holdings shares at "Outperform"

NEW YORK—Shares of Hill-Rom Holdings Inc. spiked 6 percent Friday, after an Oppenheimer analyst started coverage of the hospital beds and stretchers maker with an "Outperform" rating and $35 price target.

Analyst Ian Zaffino said Hill-Rom is an underfollowed, pure-play medical device company, which has about 31 percent of the $2.8 billion North American acute care market and is aggressively increasing its presence internationally and in post-acute care settings.

"We believe the second half of this year could be an inflection point for the company, as revenue, margins and earnings begin to increase at an accelerating pace," he wrote in a note to clients.

Zaffino points to Hill-Rom as a "classic underfollowed situation," since before spinning off funeral services business Batesville Casket to Hillenbrand, it attracted little investor or sell-side interest owing to the disparate nature of its businesses.

"However, it is now a pure play and thus easier to analyze," Zaffino asserted. "This, along with successful execution of its business plan and strong revenue, earnings and free cash flow, could broaden its following on the Street and ultimately lead to a higher valuation for the stock."

Shares of the Batesville, Ind.-based company rose $1.53 close at $26.90.