Industrial Automation And Reshoring Will Fuel Secular Expansion

Key Takeaways

• Accelerated backlog recovery, portfolio optimization, and aggressive integration initiatives set the stage for stronger revenue, margin, and cash flow growth than most expect.
  
• Strategic focus on automation, supply chain localization, and sustainability positions Hillenbrand for premium market share and durable earnings in industrial digitization and circular economy trends.
  
• Structural declines in traditional plastics, competition, and integration risks jeopardize Hillenbrand's margins and growth as markets shift to automation, sustainability, and software solutions.

Catalysts

Operates as an industrial company in the United States and internationally.

• Analyst consensus expects a rebound in order activity as macro and tariff uncertainties fade, but this likely understates the magnitude and duration of pent-up demand; with full test facilities, robust quoting pipelines, and key order wins in multiple regions and end markets already materializing, sequential backlog recovery could be sharper and sustained, enabling above-consensus revenue and EBITDA acceleration as normalization plays out.
  
• Analysts broadly agree that portfolio optimization will favorably shift Hillenbrand's earnings profile, but they may underestimate the pace and scale of incremental margin gains-having secured $30 million in run-rate synergies two years ahead of plan and launching full commercial integration, accelerating cross-selling and "systems selling" initiatives can drive outsized improvement in EBITDA margins and cash flow well beyond current expectations.
  
• Hillenbrand's deepening investment in automation, smart factory solutions, and digital service offerings positions it to capture a disproportionate share of the industrial digitization trend, as IoT-enabled equipment and recurring aftermarket services deliver durable, high-margin revenue streams and strengthen long-term earnings quality.
  
• With a strengthened local-for-local manufacturing and supplier network, Hillenbrand is uniquely poised to capitalize on the global trend of supply chain localization and reshoring, rapidly expanding its addressable market in the U.S., Europe, and Asia while structurally insulating net margins from trade shocks and tariff risks.
  
• Intensifying global focus on sustainability and circular economy solutions is setting the stage for premium demand and pricing for Hillenbrand's advanced process equipment in food and plastics recycling, supporting both elevated revenue growth and sustained gross margin expansion in core growth platforms.

Hillenbrand Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Hillenbrand compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Hillenbrand's revenue will decrease by 5.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -0.7% today to 10.3% in 3 years time.
• The bullish analysts expect earnings to reach $252.2 million (and earnings per share of $4.0) by about September 2028, up from $-20.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 15.2x on those 2028 earnings, up from -84.8x today. This future PE is lower than the current PE for the US Machinery industry at 24.0x.
• Analysts expect the number of shares outstanding to grow by 0.34% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.47%, as per the Simply Wall St company report.

Hillenbrand Future Earnings Per Share Growth

Risks

• Hillenbrand's heavy exposure to industrial machinery and plastics processing leaves it vulnerable to long-term declines in traditional plastics demand from global decarbonization and circular economy efforts, which could depress revenue over time as customers shift away from these sectors.
  
• The company's recent results showed significant year-over-year declines in revenue and adjusted EBITDA, driven by low capital equipment volumes and an unfavorable product mix in the APS segment, suggesting ongoing cyclical and structural pressure on earnings and margins.
  
• Persistently high competition and pricing pressure in key markets such as China, India, and the Americas, combined with Hillenbrand's reliance on hardware-centric product lines, may erode its ability to maintain or expand margins, especially if competitors advance further in automation and SaaS-based solutions.
  
• Geopolitical uncertainty and rising trade barriers continue to cause customers to delay investment decisions, as seen in order pushouts tied to tariff uncertainty, increasing the risk of ongoing fluctuations in backlog and lower top-line growth.
  
• Ongoing integration risks from recent acquisitions and restructuring activities introduce the possibility of unforeseen charges or goodwill impairments, which could limit improvements in net margins and constrain future cash flows needed for innovation and debt reduction.

Valuation

• The assumed bullish price target for Hillenbrand is $40.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Hillenbrand's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $40.0, and the most bearish reporting a price target of just $24.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $2.4 billion, earnings will come to $252.2 million, and it would be trading on a PE ratio of 15.2x, assuming you use a discount rate of 10.5%.
  
• Given the current share price of $24.66, the bullish analyst price target of $40.0 is 38.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.