Back to top

Image: Bigstock

What's Setting the Tone for Hologic's (HOLX) Q4 Earnings?

Read MoreHide Full Article

Hologic, Inc (HOLX - Free Report) is slated to report fourth-quarter fiscal 2019 results on Nov 7, after the closing bell. The company’s earnings surpassed the Zacks Consensus Estimate in three of the past four quarters, the average beat being 4.5%.

Let’s see how things are shaping up prior to this announcement.

Key Catalyst

Hologic is optimistic about sustaining the solid earnings trend in 2018, courtesy of gains from the Breast Health segment.  There has been a consistent rise in market share within Breast Health on the back of direct-to-consumer initiatives, introduction of products, software and services along with a strong mammography systems portfolio.

Management seems upbeat about the buyout of Faxitron Bioptics, a privately-held leader in digital specimen radiography. The acquisition was aimed to broaden the Breast Health portfolio and strengthen Hologic’s position in the breast conserving surgery market.

Additionally, the company’s adoption of new mammography systems, 3Dimensions and 3D Performance, encourages us. These products have started to leverage the company’s Genius brand and have encouraged customers to upgrade their existing 2D systems.

In this regard, the receipt of PMA from the FDA for Clarity HD high-resolution 3D imaging and Intelligent 2D imaging technology is noteworthy. These products are now available in the 3Dimensions breast tomosynthesis system.

Hologic, Inc. Price and EPS Surprise

 

Also, the global sales of interventional breast products — mainly biopsy systems and disposables — have been rising consistently. Increase in Affirm prone table sales is another positive. The company projects that the Brevera, a new real-time biopsy system, will continue to drive growth in fiscal 2018.

The company also has a CE Mark for the Brevera breast biopsy system with CorLumina imaging technology, a real-time breast biopsy and verification system.

Accordingly, the Zacks Consensus Estimate for interventional breast solutions revenues is pegged at $49.2 million, showing a rise of 16.3% from the prior-year quarter. The consensus estimate for Mammography/Breast Care revenues is pegged at $306 million, which reflects an increase of 1.7% from the year-ago quarter.

Other factors that are likely to influence Hologic’s results in the fiscal fourth quarter are as follows:

The company expects the Diagnostics segment to maintain a stellar performance on strength in Molecular Diagnostics business. In the United States, the company is likely to gain from increasing market share, utilization of the Panther system along with market expansion by conforming to testing guidelines.

Global growth in Molecular Diagnostics segment can be attributed to the Panther system, Hologic’s fully-automated molecular diagnostics instrument. Also, frequent utilization of Aptima women’s health assays is another catalyst.

Notably, Aptima assays have gained a huge customer base with respect to testing for chlamydia and gonorrhea, HPV (human papillomavirus) and trichomonas. We are also hopeful about Hologic’s expanded market for sexually transmitted disease testing.

The company is also seeing strong demand for virology tests. Notably, during third-quarter fiscal 2018, sales of HIV, HCV and HPV tests more than doubled from the prior-year quarter. A similar trend is expected to be maintained in the to-be-reported quarter.

The Zacks Consensus Estimate of $157 million for Molecular Diagnostics revenues reflects an increase of 1.9% from the year-ago quarter.

Management is highly optimistic about international performance as well. During the third quarter of fiscal 2018, international revenues exceeded $200 million and rose 10.5% on strong contribution from the Breast Health business. This trend is expected to continue in the to-be-reported quarter.

On the flip side, Hologic faced challenges like unfavorable foreign currency movement over the past few quarters. Escalating operating expenses and intense competition, particularly in the tomosynthesis market, are persisting headwinds.

Overall, for fourth-quarter fiscal 2018, Hologic expects adjusted revenues of $800-$815 million, representing annualized decline of 4% to annualized growth of 1.5% at CER. The Zacks Consensus Estimate for revenues stands at $805.1 million, reflecting an increase of 0.3% from the year-ago quarter.

Adjusted EPS is estimated at 58-60 cents, reflecting annualized growth of 16-20%.

What Our Model Suggests

Per the proven Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has higher chances of beating estimates if it also has a positive Earnings ESP.

Hologic has a Zacks Rank #4 (Sell) and an Earnings ESP of +0.21%. The combination does not show a beat for the company this earnings season. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for earnings of 59 cents reflects an 18% rise on a year-over-year basis.

Meanwhile, we caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat in their upcoming quarterly results.

Haemonetics Corporation (HAE - Free Report) has an Earnings ESP of +5.56% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Quidel Corporation (QDEL - Free Report) has an Earnings ESP of +10.55% and a Zacks Rank #3.

Myriad Genetics, Inc. (MYGN - Free Report) has an Earnings ESP of +9.09% and a Zacks Rank #3.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

Published in