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Breast Health Sales to Drive Hologic's (HOLX) Q4 Earnings

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Hologic, Inc.’s (HOLX - Free Report) Breast Health arm has been witnessing a faster-than-expected return to growth on the company’s efforts to diversify the business across the patient continuum of care. Moreover, the company’s GYN Surgical business is witnessing continued growth banking on new leadership, strong strategic execution of new commercial models and new product launches.

We anticipate the company’s fourth-quarter fiscal 2021 results, scheduled for release on Nov 1 after the closing bell, to reflect these attributes duly.

Click here to know how the company’s overall fourth-quarter performance is expected to be.

Breast Health

Management, during the fiscal third-quarter earnings call, observed that the Breast Health arm has been witnessing impressive progress over the past few months despite the pandemic-led challenging business climate. We are optimistic about an improvement in sequential performance by the segment during the fiscal fourth quarter on the recent launches within the segment and the February-closed acquisition of Biotheranostics.

Biotheranostics -- a leader in molecular tests for breast and metastatic cancers -- enables Hologic to expand into the adjacent growth market of oncology.  During the third-quarter earnings call, Hologic noted that Biotheranostics is witnessing an excellent start with about $13 million of revenues in the third quarter, more than 30% higher than their best quarter before the pandemic. We expect Biotheranostics to have contributed significantly to fourth-quarter revenues by enabling Hologic to enter the lab-based oncology space.

The company’s SuperSonic MACH 20 ultrasound system and the availability of 3D ultrasound imaging on the SuperSonic MACH 30 and 20 ultrasound systems in Europe (launched in January 2021) are expected to have witnessed continued market adoption, thus adding to revenue growth within the Breast Health segment in fourth-quarter fiscal 2021. During its fiscal third-quarter earnings release, the company noted the purchase of distributors in Germany, Spain, and other markets to get closer to customers and secure more service revenues. We believe this to have contributed to Hologic’s to-be-reported quarter growth.

Hologic, Inc. Price and EPS Surprise

During the third-quarter earnings call, Hologic confirmed the development of related women's health tests that are often performed from the same patient sample, such as vaginosis panel and test for Mycoplasma genitaliu. The company has also developed new software packages like Clarity HD, which provide the industry's fastest, highest-resolution images along with new tools like Genius AI detection, a deep learning-based software that helps radiologists detect subtle potential cancer. Further, in May 2021, Hologic received the broader Medicare coverage for its Breast Cancer Index test under an expanded Medicare Local Coverage Determination. These developments are expected to have contributed to revenue growth within the Breast Health segment in third-quarter fiscal 2021.

The Zacks Consensus Estimate for Breast Health’s revenues is pegged at $341 million, suggesting a rise of 17.9% from the year-ago quarter’s reported figure.

GYN Surgical

Similar to the last-reported quarter, Hologic’s GYN Surgical business arm is expected to have registered strong growth in the to-be-reported quarter driven by robust adoption of its ProVu laparoscopic radio frequency ablation system (used for the treatment of uterine fibroids) along with new hysteroscopes and Acessa's laparoscopic radio frequency ablation system. Further, the quarterly performance is expected to have been boosted by the European launch of its CE-marked Fluent fluid management system in January 2021.

In July 2021, Hologic announced that Anthem (ANTM - Free Report) -- the second-largest health plan company in the United States -- updated its medical policy to cover Laparoscopic Radiofrequency Ablation (LAP-RFA), which includes the former’s Acessa procedure. This new coverage expands access to millions of women across the country suffering from uterine fibroids. We expect this major development to have expanded the customer base for Hologic, contributing significantly to the company’s fourth-quarter revenues.

In June 2021, Hologic announced that Cigna updated its policy to cover the Acessa Laparoscopic Radiofrequency Ablation (Lap-RFA) as a medically necessary procedure. This new coverage validates laparoscopic radiofrequency ablation (Lap-RFA) as a standard of care for uterine fibroids, expanding access to millions of women across the country. We expect these developments to have contributed significantly to Hologic’s GYN Surgical arm revenue growth in the fiscal fourth quarter.

The Zacks Consensus Estimate for total GYN Surgical revenues is pegged at $123 million, suggesting a rise of 23% from the year-ago quarter figure.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has higher chances of beating estimates. However, this is not the case here as you can see:

Earnings ESP: Hologic has an Earnings ESP of +7.30%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).

Stocks Worth a Look

Here are a couple of medical stocks worth considering as these have the right combination of elements to beat on earnings this reporting cycle.

Henry Schein, Inc. (HSIC - Free Report) has an Earnings ESP of +0.31% and a Zacks Rank of 2. The company will release third-quarter 2021 results on Nov 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

West Pharmaceutical Services, Inc. (WST - Free Report) has an Earnings ESP of +1.93% and a Zacks Rank of 2. The company is scheduled to release third-quarter 2021 results on Oct 28.