Hillenbrand, Inc. (HI) is facing challenges in its revenue growth, according to an investment thesis by peterschreiber.media. The company is experiencing near-term revenue headwinds in both its Advanced Process Solutions (APS) and Molding Technology Solutions (MTS) segments. This is due to lower backlog and order bookings, as well as macroeconomic uncertainty and a high-interest rate environment impacting customer decision-making. As a result, the company’s revenue is expected to be adversely impacted in the coming quarters.

In the fourth quarter of 2023, Hillenbrand reported a 26.3% year-over-year increase in net revenues, primarily attributed to acquisitions. However, on an organic basis, revenues declined 1.2% year-over-year. The APS segment saw net revenues grow 57.3% year-over-year, while the MTS segment’s net revenue declined 10.4% year-over-year.

Looking ahead, the company’s near-term outlook is challenging, with organic backlog down 14.3% year-over-year. The APS segment’s organic backlog is down 8.6% year-over-year, and the MTS segment backlog is down 36.5% year-over-year. The company has guided for -3% to 3% year-over-year organic revenue growth, but there is potential for a downward revision if order rates do not improve.

Additionally, Hillenbrand’s margins are facing challenges, despite some positive factors. The company’s adjusted EBITDA margin increased in the fourth quarter, but the near-term margin outlook is unfavorable, with the adverse impact of lower-margin acquisitions and volume deleveraging.

The company is currently trading at a discount versus its historical averages, and the author of the thesis recommends a neutral rating on the stock, suggesting a wait-and-see approach until order trends improve and net leverage reaches targeted levels.