Hologic Inc. (HOLX - Free Report) reported fourth-quarter fiscal 2016 adjusted earnings per share (EPS) of 52 cents, up 20.9% year over year. Adjusted EPS also beat the Zacks Consensus Estimate by 4% and exceeded the company guidance of 49–50 cents.
Management believes the company’s additional capital deployment efforts have led to faster EPS growth in comparison to revenue.
On a reported basis, the company recorded net income of $92.2 million or 33 cents per share, reflecting a massive year-over-year improvement of 265.8% or 266.7%, respectively.
Fiscal 2016 earnings came in at $1.16, up 157.7% from the previous year. The full-year earnings missed the Zacks Consensus Estimate of $1.94.
Revenues in Detail
Revenues grossed $726.8 million in the quarter, up 3.4% year over year. The top line also comfortably exceeded the Zacks Consensus Estimate of $721 million and the company's estimation of $714–$724 million. At constant exchange rate (CER), revenue growth was 3.8%. Excluding the headwind from discontinued products, revenue growth was 4% (up 4.4% at CER) in the fourth quarter.
Solid growth across all of Hologic’s four business segments, led by GYN Surgical, drove the upside in the top line.
Geographically, revenues in the U.S. increased 7.4% year over year to $578.0 million on the back of persistent strong recent trends. On the other hand, international revenues dropped 9.6% (down 7.8% at CER) to $148.9 million, due to inventory fluctuations in blood screening.
Segments in Detail
Sales at the Diagnostics segment (42.9% of total revenue) grew 2.5% year over year (up 3.1% at CER) to $311.9 million in the quarter. Growth was primarily driven by global molecular diagnostics and cytology and perinatal revenues, which improved 0.2% and 9.0%, respectively, at CER. However, revenues from blood screening products dropped 6% at CER.
Sales from the Breast Health segment (40.2%) rose 2.1% (up 2.3% at CER) to $292.3 million. Growth was primarily driven by domestic sales of 7.2%, which in turn was supported by an increase in service revenues and new product sales that supplemented continued adoption of Hologic’s Genius 3D Mammography systems.
Sales from the GYN Surgical business (14%) improved 16.9% (up 17.6% at CER) to $101.5 million, on account of 32.7% (33.4% at CER) growth in MyoSure system sales and 7.9% ( up 8.7% at CER) rise in NovaSure system. Revenues from Skeletal Health (accounting for the rest) dropped 17.1% (17.3% at CER) to $21.1 million due to lower sales of mini C-arm products.
Operational Update
In the fourth quarter, Hologic’s gross margin expanded 189 basis points (bps) to 55.8%, while adjusted gross margin improved 110 bps to 65.7%. This improvement can be attributed to strong domestic sales growth, favorable product mix, and operational improvement.
Hologic's adjusted operating expenses amounted to $235.5 million, up 7.7% year over year on account of the company’s planned investments in Breast Health and Diagnostics marketing, and increased selling expenses. Adjusted operating margin contracted 20 bps to 33.3%, owing to higher gross profit.
Financial Update
Hologic exited the fiscal with cash and cash equivalents of $548.4 million, comparing favorably with $441.5 million reported at the end of third-quarter fiscal 2016. Total long-term debt as on Sep 24, 2016 was $3.34 billion, compared with $3.61 billion at the end of the previous quarter.
Operating cash flow in the quarter was $787.2 million, up 0.1% from the year-ago quarter’s equivalent. During the fourth quarter, Hologic repurchased 7.3 million shares of its common stock for $250 million.
Fiscal 2017 Guidance
Hologic provided its guidance for fiscal 2017. The company expects revenues in the range of $2.94–$2.98 billion. This new revenue guidance reflects annualized growth of 3.8%–5.2% on a reported basis and 4%–5.5% at CER. The current Zacks Consensus Estimate of $2.94 billion coincides with the lower end of the company provided guidance.
Hologic has also issued its EPS outlook for fiscal 2017. The company currently projects adjusted EPS in the range of $1.23–$1.27 for fiscal 2017 (reflecting annualized growth of 6.0%–9.5% and 8.5%–10.6% at CER). The current Zacks Consensus Estimate for adjusted EPS is pegged at $2.14, below the company guided range.
For first-quarter fiscal 2017, Hologic expects revenues of $720–$730 million, representing annualized growth of 3.8%–5.2% and 3.6%–5.0% at CER.Adjusted EPS is projected at 50–51 cents (reported growth of 9.1%–11.3% and 8.7%–10.9% at CER). The current Zacks Consensus Estimate for first-quarter revenues and EPS are pegged at $713.5 million and 51 cents, respectively.
Our Take
Hologic exited fiscal 2016 on an impressive note, with both its top and bottom line comfortably exceeding the Zacks Consensus Estimate. The company’s strong cash balance position also encourages us. However, Hologic witnessed a slump in its blood screening business this quarter, as per management’s expectation, owing to higher orders received in the prior-year period.
Moreover, we are impressed to note that despite the higher operating expenses, Hologic observed gross margin expansion. This improvement is because of strong domestic sales growth, favorable product mix, and operational improvement. The company’s guidance for 2017 also raises hope as it indicates considerable expansion going forward.
Zacks Rank & Other Key Picks
Hologic currently carries a Zacks Rank #2 (Buy). Other favorably ranked medical stocks are GW Pharmaceuticals plc , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
GW Pharmaceuticals surged 63.2% year to date compared to the S&P 500’s 2.6% over the same period. The company’s four-quarter average earnings surprise is 41.6%.
Baxter international rallied 24.4% in the past one year, way better than the S&P 500’s -0.2%. It has a trailing four-quarter average positive earnings surprise of 27%.
Bovie Medical recorded 162.6% gain in the past one year, above the S&P 500’s 2.4%. The company has a trailing four-quarter average earnings surprise of 6.3%.
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Hologic Inc. (HOLX - Free Report) reported fourth-quarter fiscal 2016 adjusted earnings per share (EPS) of 52 cents, up 20.9% year over year. Adjusted EPS also beat the Zacks Consensus Estimate by 4% and exceeded the company guidance of 49–50 cents.
Management believes the company’s additional capital deployment efforts have led to faster EPS growth in comparison to revenue.
On a reported basis, the company recorded net income of $92.2 million or 33 cents per share, reflecting a massive year-over-year improvement of 265.8% or 266.7%, respectively.
Fiscal 2016 earnings came in at $1.16, up 157.7% from the previous year. The full-year earnings missed the Zacks Consensus Estimate of $1.94.
Revenues in Detail
Revenues grossed $726.8 million in the quarter, up 3.4% year over year. The top line also comfortably exceeded the Zacks Consensus Estimate of $721 million and the company's estimation of $714–$724 million. At constant exchange rate (CER), revenue growth was 3.8%. Excluding the headwind from discontinued products, revenue growth was 4% (up 4.4% at CER) in the fourth quarter.
Solid growth across all of Hologic’s four business segments, led by GYN Surgical, drove the upside in the top line.
Geographically, revenues in the U.S. increased 7.4% year over year to $578.0 million on the back of persistent strong recent trends. On the other hand, international revenues dropped 9.6% (down 7.8% at CER) to $148.9 million, due to inventory fluctuations in blood screening.
Segments in Detail
Sales at the Diagnostics segment (42.9% of total revenue) grew 2.5% year over year (up 3.1% at CER) to $311.9 million in the quarter. Growth was primarily driven by global molecular diagnostics and cytology and perinatal revenues, which improved 0.2% and 9.0%, respectively, at CER. However, revenues from blood screening products dropped 6% at CER.
Sales from the Breast Health segment (40.2%) rose 2.1% (up 2.3% at CER) to $292.3 million. Growth was primarily driven by domestic sales of 7.2%, which in turn was supported by an increase in service revenues and new product sales that supplemented continued adoption of Hologic’s Genius 3D Mammography systems.
Sales from the GYN Surgical business (14%) improved 16.9% (up 17.6% at CER) to $101.5 million, on account of 32.7% (33.4% at CER) growth in MyoSure system sales and 7.9% ( up 8.7% at CER) rise in NovaSure system. Revenues from Skeletal Health (accounting for the rest) dropped 17.1% (17.3% at CER) to $21.1 million due to lower sales of mini C-arm products.
Operational Update
In the fourth quarter, Hologic’s gross margin expanded 189 basis points (bps) to 55.8%, while adjusted gross margin improved 110 bps to 65.7%. This improvement can be attributed to strong domestic sales growth, favorable product mix, and operational improvement.
Hologic's adjusted operating expenses amounted to $235.5 million, up 7.7% year over year on account of the company’s planned investments in Breast Health and Diagnostics marketing, and increased selling expenses. Adjusted operating margin contracted 20 bps to 33.3%, owing to higher gross profit.
Financial Update
Hologic exited the fiscal with cash and cash equivalents of $548.4 million, comparing favorably with $441.5 million reported at the end of third-quarter fiscal 2016. Total long-term debt as on Sep 24, 2016 was $3.34 billion, compared with $3.61 billion at the end of the previous quarter.
Operating cash flow in the quarter was $787.2 million, up 0.1% from the year-ago quarter’s equivalent. During the fourth quarter, Hologic repurchased 7.3 million shares of its common stock for $250 million.
Fiscal 2017 Guidance
Hologic provided its guidance for fiscal 2017. The company expects revenues in the range of $2.94–$2.98 billion. This new revenue guidance reflects annualized growth of 3.8%–5.2% on a reported basis and 4%–5.5% at CER. The current Zacks Consensus Estimate of $2.94 billion coincides with the lower end of the company provided guidance.
Hologic has also issued its EPS outlook for fiscal 2017. The company currently projects adjusted EPS in the range of $1.23–$1.27 for fiscal 2017 (reflecting annualized growth of 6.0%–9.5% and 8.5%–10.6% at CER). The current Zacks Consensus Estimate for adjusted EPS is pegged at $2.14, below the company guided range.
For first-quarter fiscal 2017, Hologic expects revenues of $720–$730 million, representing annualized growth of 3.8%–5.2% and 3.6%–5.0% at CER.Adjusted EPS is projected at 50–51 cents (reported growth of 9.1%–11.3% and 8.7%–10.9% at CER). The current Zacks Consensus Estimate for first-quarter revenues and EPS are pegged at $713.5 million and 51 cents, respectively.
Our Take
Hologic exited fiscal 2016 on an impressive note, with both its top and bottom line comfortably exceeding the Zacks Consensus Estimate. The company’s strong cash balance position also encourages us. However, Hologic witnessed a slump in its blood screening business this quarter, as per management’s expectation, owing to higher orders received in the prior-year period.
Moreover, we are impressed to note that despite the higher operating expenses, Hologic observed gross margin expansion. This improvement is because of strong domestic sales growth, favorable product mix, and operational improvement. The company’s guidance for 2017 also raises hope as it indicates considerable expansion going forward.
Zacks Rank & Other Key Picks
Hologic currently carries a Zacks Rank #2 (Buy). Other favorably ranked medical stocks are GW Pharmaceuticals plc , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
GW Pharmaceuticals surged 63.2% year to date compared to the S&P 500’s 2.6% over the same period. The company’s four-quarter average earnings surprise is 41.6%.
Baxter international rallied 24.4% in the past one year, way better than the S&P 500’s -0.2%. It has a trailing four-quarter average positive earnings surprise of 27%.
Bovie Medical recorded 162.6% gain in the past one year, above the S&P 500’s 2.4%. The company has a trailing four-quarter average earnings surprise of 6.3%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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