Hillenbrand (HI) has rallied nearly 10% this week, despite the pressure of unimpressive third-quarter earnings and downward revised guidance for 2015 hanging on the shares. After this recent momentum, the stock looks fully valued at 17X expected 2015 EPS, especially considering that the Batesville casket segment (roughly 50% of operating earnings) saw a big 5% drop in volume last quarter with no near-term improvement likely in an industry that remains in a secular decline.
While the process control business continues to do well, I don’t think this is enough to carry the company or value it with a high enough multiple to compensate for the issues with Batesville. With our position back in positive territory, I recommend we use the market strength to sell HI and move on to new opportunities.