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Hologic (HOLX) Up 8% Since Earnings Report: Can It Continue?

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It has been more than a month since the last earnings report for Hologic, Inc. (HOLX - Free Report) . Shares have added about 8% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Hologic reported fourth-quarter fiscal 2017 adjusted earnings per share (EPS) of 50 cents, down 3.8% year over year. However, adjusted EPS beat the Zacks Consensus Estimate by a penny and remained at the upper end of the company’s guidance of 48-50 cents.

On a reported basis, the company recorded earnings of 29 cents per share, reflecting a year-over-year decline of 12.1%.

Revenues in Detail

Revenues grossed $802.9 million in the quarter, up 10.5% year over year (up 9.9% at constant exchange rate or CER). The top line also exceeded the Zacks Consensus Estimate of $793 million and the company’s own estimation of $785-$800 million.

Solid double-digit growth at Hologic’s molecular diagnostics and international business drove this upside in the top line.

Geographically, revenues in the United States grew 6.1% year over year to $613 million. Excluding blood screening and medical aesthetics, U.S. revenues rose 1.4%. On the other hand, international revenues were up 27.5% (up 24.7% at CER) to $189.9 million, banking on a strong contribution from Cynosure. Excluding blood screening and medical aesthetics, international revenues increased 20.8% or 17.5% at constant currency.

Segments in Detail

Revenues at the Diagnostics segment (36.3% of total revenues) declined 6.5% year over year (down 7% at CER) to $291.7 million in the fourth quarter. Under this segment, Molecular Diagnostics revenues of $153.5 million increased 14.3% (13.8% at CER). The global growth in Molecular Diagnostics was primarily driven by an increasing market share and utilization of fully automated Panther system. Notably, by the end of 2017, Hologic had shipped about 1,300 Panthers to Diagnostics customers worldwide. This quarter marked the sixth consecutive period of double digit growth for Molecular Diagnostics, internationally.

Cytology and Perinatal revenues of $120.2 million also showed a decline of 0.7% (down 1.4% at CER).

Revenues at the Breast Health segment (37.5%) inched up 2.9% (up 2.4% at CER) to $300.9 million. Revenues in the United States slipped 1.2%. In the reported quarter, changes in product mix were partially offset by increases in service and new product revenues. International revenues however climbed 20.6% year over year at CER.

Revenues from the GYN Surgical business (13%) were up 3.2% (up 2.7% at CER) to $104.7 million. Medical Aesthetic business in the quarter reported revenues of $81.4 million, determining 10.1% of total revenues. Revenues at Skeletal Health (accounting for the rest) increased 14.2% (up12.9% at CER) to $24.2 million.

Operational Update

In the fiscal fourth quarter, Hologic’s gross margin contracted 390 basis points (bps) to 52%. Adjusted gross margin also decreased 160 bps to 64.1% due to divestiture of blood screening business and revenues from low-margin Cynosure products.

Hologic’s adjusted operating expenses amounted to $275.8 million, up 17.1% year over year. Adjusted operating margin contracted a massive 350 bps to 29.8%.

Financial Update

Hologic exited fiscal 2017 with cash and cash equivalents of $540.6 million, marginally below $548.4 billion, reported at the end of fiscal 2016. Total long-term debt was $3.32 billion at the end of this fiscal compared with $3.35 billion at the end of last fiscal.

Full-year operating cash flow was $8.3 million compared with the year-ago cash flow of $798.2 million.

Guidance

Hologic has provided its fiscal 2018 financial guidance. The company currently expects adjusted revenues to grow in the range of 4-6.6% at CER to $3.2-$3.28 billion. The current Zacks Consensus Estimate stands at $3.29, above the guided range

Adjusted EPS are expected to grow by 3.4-5.9% to $2.10-$2.15. The current Zacks Consensus Estimate for adjusted EPS is pegged at $2.14, falling just below the upper end of the guided range.

For first-quarter fiscal 2018, Hologic expects adjusted revenues of $775-$790 million, representing annualized growth of 5.5-7.6% at CER. The current Zacks Consensus Estimate for revenues is pegged at $806.4 million, ahead of the projected range.

Adjusted EPS is projected at 48-50 cents, reflecting an annualized decline of (7.7)-(3.8)%. The current Zacks Consensus Estimate for first-quarter adjusted EPS is pegged at 51 cents, above the company’s guidance.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

Hologic, Inc. Price and Consensus

 

Hologic, Inc. Price and Consensus | Hologic, Inc. Quote

VGM Scores

At this time, Hologic's stock has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our styles scores.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.


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