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Here's Why Investors Should Retain Hologic (HOLX) Stock for Now
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Hologic, Inc. (HOLX - Free Report) has been gaining from strength in the core molecular diagnostics franchise. The company’s earnings and revenues in the second quarter of fiscal 2022 were ahead of the Zacks Consensus Estimate. Robust performance by the GYN Surgical segment instills optimism. However, declining sales and a weak solvency position are a concern.
In the past year, the Zacks Rank #3 (Hold) stock has gained 27% compared with a 13.2% fall of the industry and a 3.2% drop of the S&P 500.
The renowned medical device company has a market capitalization of $19.72 billion. Its earnings for second-quarter fiscal 2022 surpassed the Zacks Consensus Estimate by 33.6%.
In the past five years, the company’s earnings have registered a 34.1% surge compared with the industry’s 8.5% rise and the S&P 500’s 13.4% increase. The company’s long-term expected growth is pegged at 15.4%, compared with the industry’s growth expectation of 15.7% and the S&P 500’s estimated 10.8% increase.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors At Play
Q2 Upsides: Hologic exited the fiscal second quarter with better-than-expected results. The recently-completed buyout of Bolder Surgical and the launch of the Panther Trax bode well. The uptick in GYN Surgical business led by resilience from newly launched products is encouraging. The company’s Panther installed base currently stands at over 3,100 instruments worldwide, with more than 45% placed internationally. The raised full-year guidance for 2022 indicates the continuation of this bullish trend.
Molecular Diagnostics Holds Potential: During the fiscal second quarter, Hologic’s core molecular diagnostics franchise grew 7% worldwide despite lower sales of COVID-19 tests. The uptick was driven by strong uptake in newer assays such as vaginitis panel and menu within the virology product line. The company registered $584 million in COVID-19 assay sales (more than $400 million higher than its outlook) and shipped about 28.5 million tests to customers.
In January 2022, the company added the Aptima SARS-CoV-2 assay to its Global Access Initiative (GAI), a program designed to expand access to critical diagnostic testing in resource-limited countries.
Strength in GYN Surgical: Revenues at the GYN Surgical business rose 2.7% year over year (up 3.5% at CER) in the fiscal second quarter. During the quarter’s earnings call, the company noted that the elective procedures trend improved as COVID-19 cases declined. The company registered resilience from several newer products, such as the Fluent fluid management system, and solid contributions from Bolder's cool sale devices.
Hologic expects MyoSure and related organic products to continue to drive near-term growth within the business. The company also expects meaningful contributions from Acessa and Bolder over several years.
Downsides
Dull Sales Scenario: In the fiscal second quarter, Hologic witnessed a year-over-year decline in revenues due to lower sales of COVID-19 assays compared with the prior-year quarter’s levels. Revenues in the Breast Heath segment fell 7.7% year over year, owing to the ongoing semiconductor chip shortage.
Weak Solvency: Hologic ended the fiscal second quarter with cash and cash equivalents of $2.29 billion. Meanwhile, total long-term debt (including the current portion) came at $3.07 billion, much higher than the quarter-end cash and cash equivalent level. This is particularly problematic in terms of the company’s solvency level. During the economic downturn, the company is not holding sufficient cash for debt repayment.
Forex Woes: Hologic remains susceptible to foreign exchange headwinds. The unfavorable foreign currency impact has been affecting the company’s overall performance in the past few quarters.
Estimate Trend
Hologic has been witnessing a positive estimate revision trend for fiscal year 2022. Over the past 90 days, the Zacks Consensus Estimate for Hologic’s fiscal 2022 earnings has moved 7.9% north to $5.49.
The Zacks Consensus Estimate for its fiscal 2022 revenues is pegged at $4.67 billion, suggesting a 17.1% fall from the year-ago reported number.
Key Picks
A few better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Medpace Holdings, Inc. (MEDP - Free Report) and UnitedHealth Group Incorporated (UNH - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, on average. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 0.2% versus the industry’s 61.4% fall.
Medpace has a historical growth rate of 27.3%. Medpace’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%. It currently has a Zacks Rank #2 (Buy).
Medpace has outperformed its industry in the past year. MEDP has declined 16.8% against the industry’s 61.4% fall.
UnitedHealth has an estimated long-term growth rate of 14.8%. UnitedHealth’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%. It currently carries a Zacks Rank #2.
UnitedHealth has outperformed the industry over the past year. UNH has gained 18.7% compared with 18% industry growth in the said period.
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Here's Why Investors Should Retain Hologic (HOLX) Stock for Now
Hologic, Inc. (HOLX - Free Report) has been gaining from strength in the core molecular diagnostics franchise. The company’s earnings and revenues in the second quarter of fiscal 2022 were ahead of the Zacks Consensus Estimate. Robust performance by the GYN Surgical segment instills optimism. However, declining sales and a weak solvency position are a concern.
In the past year, the Zacks Rank #3 (Hold) stock has gained 27% compared with a 13.2% fall of the industry and a 3.2% drop of the S&P 500.
The renowned medical device company has a market capitalization of $19.72 billion. Its earnings for second-quarter fiscal 2022 surpassed the Zacks Consensus Estimate by 33.6%.
In the past five years, the company’s earnings have registered a 34.1% surge compared with the industry’s 8.5% rise and the S&P 500’s 13.4% increase. The company’s long-term expected growth is pegged at 15.4%, compared with the industry’s growth expectation of 15.7% and the S&P 500’s estimated 10.8% increase.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors At Play
Q2 Upsides: Hologic exited the fiscal second quarter with better-than-expected results. The recently-completed buyout of Bolder Surgical and the launch of the Panther Trax bode well. The uptick in GYN Surgical business led by resilience from newly launched products is encouraging. The company’s Panther installed base currently stands at over 3,100 instruments worldwide, with more than 45% placed internationally. The raised full-year guidance for 2022 indicates the continuation of this bullish trend.
Molecular Diagnostics Holds Potential: During the fiscal second quarter, Hologic’s core molecular diagnostics franchise grew 7% worldwide despite lower sales of COVID-19 tests. The uptick was driven by strong uptake in newer assays such as vaginitis panel and menu within the virology product line. The company registered $584 million in COVID-19 assay sales (more than $400 million higher than its outlook) and shipped about 28.5 million tests to customers.
In January 2022, the company added the Aptima SARS-CoV-2 assay to its Global Access Initiative (GAI), a program designed to expand access to critical diagnostic testing in resource-limited countries.
Strength in GYN Surgical: Revenues at the GYN Surgical business rose 2.7% year over year (up 3.5% at CER) in the fiscal second quarter. During the quarter’s earnings call, the company noted that the elective procedures trend improved as COVID-19 cases declined. The company registered resilience from several newer products, such as the Fluent fluid management system, and solid contributions from Bolder's cool sale devices.
Hologic expects MyoSure and related organic products to continue to drive near-term growth within the business. The company also expects meaningful contributions from Acessa and Bolder over several years.
Downsides
Dull Sales Scenario: In the fiscal second quarter, Hologic witnessed a year-over-year decline in revenues due to lower sales of COVID-19 assays compared with the prior-year quarter’s levels. Revenues in the Breast Heath segment fell 7.7% year over year, owing to the ongoing semiconductor chip shortage.
Weak Solvency: Hologic ended the fiscal second quarter with cash and cash equivalents of $2.29 billion. Meanwhile, total long-term debt (including the current portion) came at $3.07 billion, much higher than the quarter-end cash and cash equivalent level. This is particularly problematic in terms of the company’s solvency level. During the economic downturn, the company is not holding sufficient cash for debt repayment.
Forex Woes: Hologic remains susceptible to foreign exchange headwinds. The unfavorable foreign currency impact has been affecting the company’s overall performance in the past few quarters.
Estimate Trend
Hologic has been witnessing a positive estimate revision trend for fiscal year 2022. Over the past 90 days, the Zacks Consensus Estimate for Hologic’s fiscal 2022 earnings has moved 7.9% north to $5.49.
The Zacks Consensus Estimate for its fiscal 2022 revenues is pegged at $4.67 billion, suggesting a 17.1% fall from the year-ago reported number.
Key Picks
A few better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Medpace Holdings, Inc. (MEDP - Free Report) and UnitedHealth Group Incorporated (UNH - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, on average. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 0.2% versus the industry’s 61.4% fall.
Medpace has a historical growth rate of 27.3%. Medpace’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%. It currently has a Zacks Rank #2 (Buy).
Medpace has outperformed its industry in the past year. MEDP has declined 16.8% against the industry’s 61.4% fall.
UnitedHealth has an estimated long-term growth rate of 14.8%. UnitedHealth’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%. It currently carries a Zacks Rank #2.
UnitedHealth has outperformed the industry over the past year. UNH has gained 18.7% compared with 18% industry growth in the said period.