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Hologic (HOLX) Q2 Earnings Miss Estimates, Margins Rise

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Hologic, Inc. (HOLX - Free Report) reported second-quarter fiscal 2021 adjusted earnings per share (EPS) of $2.59, up 354.4% year over year. However, the bottom line lagged the Zacks Consensus Estimate by 1.2%.

The adjustments include charges and benefits related to amortization of acquired intangible assets, MDR expenses, and restructuring and integration/consolidation costs, to name a few.

The company’s GAAP EPS was $2.38 in the quarter compared with the year-ago EPS of 36 cents, reflecting a stupendous 561.1% improvement.

Revenues in Detail

Revenues grossed $1.54 billion in the reported quarter, up 103.4% year over year (up 98.7% at constant exchange rate or CER). The metric again lagged the Zacks Consensus Estimate by 0.4%.

Organic revenues (excluding divested Blood business and buyouts of Acessa, Biotheranostics and Diagenode) of $1.52 billion increased 104.7% year over year and 100% at CER.

U.S. revenues of $1.06 billion rose 85.1%, whereas international revenues of $473.6 million improved 161.4% year over year or 142.2% at CER.

Organically, revenues in the United States rose 86.8% year over year to $1.05 billion in the quarter. International revenues were up 159.9% year over year (up 140.7% at CER) to $470.9 million.

Segments in Detail

Revenues at the Diagnostics segment rose 233.4% year over year (up 225.2% at CER) to $1.06 billion in the quarter under review, with Molecular Diagnostics being the major driver. Molecular Diagnostics’ revenues of $935.3 million climbed 390.6% (up 378.4% at CER), continuing the division’s strong performance. However, Blood Screening revenues of $12 million fell 21.3% year over year and at CER.

Hologic, Inc. Price, Consensus and EPS Surprise

 

Hologic, Inc. Price, Consensus and EPS Surprise

Hologic, Inc. price-consensus-eps-surprise-chart | Hologic, Inc. Quote

Revenues at the Breast Health segment improved 9.3% from the year-ago period (up 7.3% at CER) to $336.3 million. This primarily resulted from a robust product portfolio and the strong demand for Brevera following its relaunch. Impressive performances by the segment’s Breast Imaging and interventional businesses also drove the top line.

Domestic sales in this segment registered an improvement in the quarter, with 7.9% revenue uptick year over year. Further, outside the United States, Breast Health sales improved by 13.6% on a reported basis and 5.3% at CER.

Revenues at the GYN Surgical business rose 8.4% year over year (up 6.6% at CER) to $114.2 million, while revenues at Skeletal Health fell 4.8% year over year (down 6.8% at CER) to $22.6 million.

Operational Update

In fiscal second quarter, the company-reported adjusted gross margin expanded 1,400 basis points (bps) to 75%. According to the company, the benefits resulted from sales of SARS-CoV-2 tests.

Adjusted operating expenses amounted to $277.7 million, up 24.8% year over year. The company-reported adjusted operating margin expanded 2,540 basis points to 56.9%.

Financial Update

Hologic ended fiscal second-quarter 2021 with cash and cash equivalents of $816.4 million compared with $868.7 million at the end of first-quarter fiscal 2021. Total long-term debt (including current portion) was $2.75 billion at the end of the second quarter of fiscal 2021 compared with $2.76 billion at the end of first quarter of fiscal 2021.

Cumulative net cash provided by operating activities at the end of second-quarter fiscal 2021 was $1.20 billion compared with $231.6 million a year ago.

Guidance

Hologic, boosted by the strength in its COVID-19 tests and the ongoing recovery of its other divisions, has provided the financial guidance for third-quarter fiscal 2021.

The company projects revenues within $1 billion-$1.07 million (projection of 21.5-30 % growth rate). The growth rate is projected in the range of 17.9-26.4% at CER and within 15.1-23.6% organically. The Zacks Consensus Estimate for third-quarter fiscal 2021 revenues is pegged at $1.31 billion.

The adjusted EPS is estimated within $1.00-$1.15, with projected growth of 33.3-53.3%. The Zacks Consensus Estimate for second-quarter fiscal 2021 EPS is pegged at $1.81.

Our Take

Hologic exited fiscal second quarter with lower-than-expected results. Soft global revenues in the Skeletal Health segment are worrying. Also, sales of COVID-19 tests in the United States, although high, have been gradually falling following the vaccine roll-out. This leads to uncertainty in Hologic's future sales of COVID tests, raising our apprehension.

On a positive note, the robust bottom- and top-line growth amid pandemic-led business disruptions is encouraging. Rise in organic revenues is impressive as well. Growth in Diagnostic revenues, led by a stupendous improvement in the company’s Molecular Diagnostics revenues, buoys optimism. Robust demand for the company’s COVID-19-related products and ongoing recovery in other segments have enabled the company to provide fiscal third-quarter guidance, which instills confidence in investors. Recently-completed buyouts of Diagenode, Biotheranostics and SOMATEX Medical Technologies GmbH bode well for the company. Expansion of both margins looks encouraging.

Zacks Rank and Key Picks

Hologic currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are AmerisourceBergen Corporation (ABC - Free Report) , Owens & Minor, Inc. (OMI - Free Report) and Omnicell, Inc. (OMCL - Free Report) .

The Zacks Consensus Estimate for AmerisourceBergen’s second-quarter fiscal 2021 revenues is pegged at $49.94 billion, suggesting a year-over-year improvement of 5.3%. The same for EPS stands at $2.50, indicating growth of 4.2% from the year-ago reported figure. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Owens & Minor’s first-quarter 2021 revenues is pegged at $2.29 billion, implying 7.9% increase from the year-earlier reported figure. The same for EPS stands at 97 cents, indicating a surge of 2,325% from the year-ago reported figure. The company currently carries a Zacks Rank #2.

The Zacks Consensus Estimate for Omnicell’s first-quarter 2021 EPS is currently pegged at 67 cents, indicating growth of 1.5% from the year-ago reported figure. The same for revenues stands at $245.4 million, indicating growth of 6.8% from the year-ago reported figure. The company currently carries a Zacks Rank #2.

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