Ahead of the Bell: Steris and Hill-Rom downgraded

In downgrading both stocks to "Trading Sell" from "Hold," analyst Elliott L. Schlang said both companies are trading at high prices relative to their expected growth rate over the next three to five years. Mentor, Ohio-based Steris Corp. makes sterilization systems, and Hill-Rom, based in Batesville, Ind., makes beds and stretchers.

Hill-Rom began trading as a standalone company on April 1, after it spun off its Batesville Casket business. Its shares are up almost 35 percent from a low of $23.92, set April 17. Steris stock is trading at its highest levels in nine years, up almost 60 percent from annual lows in January.

But Schlang thinks higher stainless steel costs threaten Steris profit in fiscal 2009. Hospitals may also delay purchasing some equipment as they wait to determine the outcome of the U.S. presidential race and any effect on funding, he said.

Hill-Rom shares finished at $32.21 Tuesday, and Steris closed at $32.74. Schlang set a price target of $25 per share on Hill-Rom stock; it has not traded below $25 since April 30. Steris shares passed his $26 price target on April 24.