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Hologic (HOLX) Q2 Earnings Surpass Estimates, 2022 View Up

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Hologic, Inc. (HOLX - Free Report) reported second-quarter fiscal 2022 adjusted earnings per share (EPS) of $2.07, down 20.1% year over year. However, the bottom line surpassed the Zacks Consensus Estimate by 33.6%.

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

The company’s GAAP EPS was $1.80 in the quarter compared with the year-ago EPS of $2.38, reflecting a 24.4% decline.

Revenues in Detail

Revenues grossed $1.44 billion in the reported quarter, down 6.6% year over year (down 5.2% at constant exchange rate or CER). However, the metric surpassed the Zacks Consensus Estimate by 12.6%.

Excluding revenues from COVID-19, organic revenues declined 1.6% at CER.

U.S. revenues of $992.4 million declined 6.7%, whereas international revenues of $443.3 million dropped 6.4% year over year or 1.8% at CER. Organically, revenues in the United States declined 8% year over year to $963.2 million in the quarter. International revenues decreased 8.6% year over year (down 3.9% at CER) to $430.6 million.

Segments in Detail

Revenues at the Diagnostics segment declined 7.3% year over year (down 5.6% at CER) to $987.1 million in the quarter under review. Cytology & Perinatal revenues of $115.4 million fell 0.1% at CER. Molecular Diagnostics’ revenues of $862.5 million declined 6.1% at CER. Blood Screening revenues of $9.2 million fell 23.3% year over year at CER.

Revenues in the Breast Health segment fell 7.7% from the year-ago period (down 6.8% at CER) to $310.4 million. This primarily resulted from the semiconductor chip shortage.

Hologic, Inc. Price, Consensus and EPS Surprise

Domestic sales in this segment fell 5.3% year over year. Further, outside the United States, Breast Health sales declined 11.2% at CER.

Revenues at the GYN Surgical business rose 2.7% year over year (up 3.5% at CER) to $117.3 million, while revenues at Skeletal Health declined 7.5% year over year (down 6.2% at CER) to $20.9 million.

Operational Update

In the fiscal second quarter, the company-provided adjusted gross margin contracted 400 basis points (bps) to 71%. According to the company, the decrease in gross margin was primarily due to a decline in COVID-19 assay sales compared to the prior-year period.

Adjusted operating expenses, as stated by the company, amounted to $338.2 million, up 21.8% year over year. The company reported adjusted operating margin contraction of 950 bps to 47.4%.

Financial Update

Hologic ended the second quarter of fiscal 2022 with cash and cash equivalents of $2.29 billion compared with $1.42 billion at the end of the first quarter of 2021. Total long-term debt (including current portion) was $3.07 billion at the end of the second quarter of fiscal 2022 compared with $3.07 billion at the end of the first quarter of 2022.

Net cash provided by operating activities at the end of second-quarter fiscal 2022 was $1.63 billion compared with $1.20 billion a year ago.

Guidance

Hologic has issued the guidance for the third quarter of fiscal 2022.

For third-quarter fiscal 2022, the company projects revenues within $875-$915 million, implying a year-over-year decline in the range of 25.1-21.7% on a reported basis, 23.4-19.9% at CER and 23.6-20.1% organically. The Zacks Consensus Estimate for second-quarter fiscal 2022 revenues is pegged at $884.8 million.

Adjusted EPS for the quarter is estimated within 67-72 cents, with a projected decline of 49.6-45.9% year over year. The Zacks Consensus Estimate for first-quarter fiscal 2022 EPS is pegged at 72 cents.

Hologic has raised the financial guidance for full-year 2022.

For fiscal 2022, the company now projects revenues within $4.60-4.70 billion, implying a year-over-year decline in the range of 18.3-16.6% on a reported basis, 17.2-15.4% at CER and 18.3-16.5% organically (previous guided range was $4.40-4.55 billion). The Zacks Consensus Estimate for fiscal 2022 revenues is pegged at $4.39 billion.

Adjusted EPS for fiscal 2022 is estimated within $5.45-$5.65, with a projected decline of 35.2-32.8% year over year (previous guided range was $4.90-5.20). The Zacks Consensus Estimate for fiscal 2022 EPS is pegged at $5.10.

Our Take

Hologic exited the second quarter of fiscal 2022 with better-than-expected results. The recently-completed buyout of Bolder Surgical along with the launch of the Panther Trax bodes well for the company. Further, the uptick in GYN Surgical business led by resilience from recently launched products such as the fluent fluid management system is encouraging. The company’s Panther installed base is now over 3,100 instruments worldwide, with more than 45% placed internationally. Further, the company has raised its full-year 2022 guidance, which indicates the continuation of this bullish trend. However, the year-over-year decline in revenues driven by lower sales of COVID-19 assays compared to the prior-year period is discouraging. The decline in the Breast Heath segment due to semiconductor chip shortages is also discouraging. Escalating operating costs and contraction of both margins are worrying.

Zacks Rank and Key Picks

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

Some better-ranked stocks in the broader medical space that have announced quarterly results are Qiagen N.V. (QGEN - Free Report) , UnitedHealth Group Incorporated (UNH - Free Report) and Centene Corporation (CNC - Free Report) .

Qiagen, carrying a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of 80 cents, which beat the Zacks Consensus Estimate by 12.7%. Revenues of $628.4 million outpaced the consensus mark by 6.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Qiagen has an estimated long-term growth rate of 11.5%. QGEN’s earnings surpassed estimates in the trailing four quarters, the average surprise being 11.7%.

UnitedHealth, having a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 14.2%.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.

Centene reported first-quarter 2022 adjusted EPS of $1.83, which surpassed the Zacks Consensus Estimate by 8.9%. Revenues of $80.1 billion outpaced the Zacks Consensus Estimate by 1.9%. It currently has a Zacks Rank #2.

Centene has an estimated long-term growth rate of 14.2%. CNC has an earnings yield of 6.6% compared with the industry’s 5.6%.

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