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Hologic (HOLX) New Products Aid Growth, Margin Pressure Stays
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Hologic, Inc. (HOLX - Free Report) has been gaining strength in the core molecular diagnostics franchise. Robust performance by the GYN Surgical segment instills optimism. However, declining sales and a weak solvency position are concerns. The stock currently carries a Zacks Rank #3 (Hold).
Over the past year, Hologic has outperformed its industry. The stock has gained 8.7% against the industry’s 30.6% fall.
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 the recently launched products such as the fluent fluid management system is encouraging. The company’s Panther installed base is now more than 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.
Hologic’s core molecular diagnostics franchise grew 7% worldwide despite lower sales of COVID-19 tests. This growth was driven by strong uptake in newer assays such as vaginitis panel and menu within the virology product line. During the second quarter, the company registered $584 million in COVID-19 assay sales, more than $400 million higher than its outlook and shipped about 28.5 million tests to customers. The United States represented about 60% of total COVID-19 assay revenues, although testing demand was strong in international markets as well.
In January 2022, Hologic added the Aptima SARS-CoV-2 assay to its Global Access Initiative (GAI), a program designed to expand access to critical diagnostic testing in resource-limited countries.
In December 2021, Hologic announced the completion of regulatory filings needed to make Panther Trax available in a number of countries and regions. The launch of Panther Trax represents the latest addition to the Panther Scalable Solutions (PSS) portfolio of products, offering the ultimate in lab automation by physically bringing together multiple Panther instruments together into a single, powerful work cell that allows labs to increase testing volumes without increasing staff.
On the flip side, Hologic witnessed a year-over-year decline in revenues due to lower sales of COVID-19 assays compared to the prior-year period. The decline in the Breast Heath segment because of the semiconductor chip shortage is also discouraging. Escalating operating costs and contraction of both margins are worrying.
In the fiscal second quarter, the company-provided adjusted gross margin contracted 400 basis points (bps) to 71% due to a decline in COVID-19 assay sales compared with the prior-year period. Adjusted operating expenses, as stated by the company, rose 21.8% year over year. The company reported an adjusted operating margin contraction of 950 bps to 47.4%.
We remain worried about the significant challenges Hologic faces owing to the unfavorable foreign currency impact that has been affecting the company’s overall performance in the past few quarters.
Key Picks
A few better-ranked stocks in the broader medical space are Alkermes plc (ALKS - Free Report) , AMN Healthcare Services, Inc. (AMN - Free Report) and Medpace Holdings, Inc. (MEDP - Free Report) .
Alkermes has an estimated long-term growth rate of 25.1%. Alkermes’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alkermes has outperformed the industry in the past year. ALKS has gained 11% against the industry’s 46% decline in the said period.
AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, on average. It currently sports a Zacks Rank #1.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 0.7% against the industry’s 53.5% fall.
Medpace has a historical growth rate of 27.3%. Medpace’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%. It currently has a Zacks Rank #2 (Buy).
Medpace has outperformed its industry in the past year. MEDP has declined 26% compared with the industry’s 53.5% fall.
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Hologic (HOLX) New Products Aid Growth, Margin Pressure Stays
Hologic, Inc. (HOLX - Free Report) has been gaining strength in the core molecular diagnostics franchise. Robust performance by the GYN Surgical segment instills optimism. However, declining sales and a weak solvency position are concerns. The stock currently carries a Zacks Rank #3 (Hold).
Over the past year, Hologic has outperformed its industry. The stock has gained 8.7% against the industry’s 30.6% fall.
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 the recently launched products such as the fluent fluid management system is encouraging. The company’s Panther installed base is now more than 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.
Hologic’s core molecular diagnostics franchise grew 7% worldwide despite lower sales of COVID-19 tests. This growth was driven by strong uptake in newer assays such as vaginitis panel and menu within the virology product line. During the second quarter, the company registered $584 million in COVID-19 assay sales, more than $400 million higher than its outlook and shipped about 28.5 million tests to customers. The United States represented about 60% of total COVID-19 assay revenues, although testing demand was strong in international markets as well.
In January 2022, Hologic added the Aptima SARS-CoV-2 assay to its Global Access Initiative (GAI), a program designed to expand access to critical diagnostic testing in resource-limited countries.
Hologic, Inc. Price
Hologic, Inc. price | Hologic, Inc. Quote
In December 2021, Hologic announced the completion of regulatory filings needed to make Panther Trax available in a number of countries and regions. The launch of Panther Trax represents the latest addition to the Panther Scalable Solutions (PSS) portfolio of products, offering the ultimate in lab automation by physically bringing together multiple Panther instruments together into a single, powerful work cell that allows labs to increase testing volumes without increasing staff.
On the flip side, Hologic witnessed a year-over-year decline in revenues due to lower sales of COVID-19 assays compared to the prior-year period. The decline in the Breast Heath segment because of the semiconductor chip shortage is also discouraging. Escalating operating costs and contraction of both margins are worrying.
In the fiscal second quarter, the company-provided adjusted gross margin contracted 400 basis points (bps) to 71% due to a decline in COVID-19 assay sales compared with the prior-year period. Adjusted operating expenses, as stated by the company, rose 21.8% year over year. The company reported an adjusted operating margin contraction of 950 bps to 47.4%.
We remain worried about the significant challenges Hologic faces owing to the unfavorable foreign currency impact that has been affecting the company’s overall performance in the past few quarters.
Key Picks
A few better-ranked stocks in the broader medical space are Alkermes plc (ALKS - Free Report) , AMN Healthcare Services, Inc. (AMN - Free Report) and Medpace Holdings, Inc. (MEDP - Free Report) .
Alkermes has an estimated long-term growth rate of 25.1%. Alkermes’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alkermes has outperformed the industry in the past year. ALKS has gained 11% against the industry’s 46% decline in the said period.
AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, on average. It currently sports a Zacks Rank #1.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 0.7% against the industry’s 53.5% fall.
Medpace has a historical growth rate of 27.3%. Medpace’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%. It currently has a Zacks Rank #2 (Buy).
Medpace has outperformed its industry in the past year. MEDP has declined 26% compared with the industry’s 53.5% fall.