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Here's Why Investors Should Retain Hologic (HOLX) Stock for Now
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Hologic, Inc. (HOLX - Free Report) is gaining from continued strength in GYN Surgical business. The company’s earnings and revenues for the third quarter of fiscal 2022 beat the Zacks Consensus Estimate. The company gained regulatory approvals in the fiscal third quarter, instilling optimism. However, declining sales and weak margins do not bode well.
In the past year, the Zacks Rank #3 (Hold) stock has lost 6.7% against a 24.1% fall of the industry and a 4.1% drop of the S&P 500.
The renowned medical device company has a market capitalization of $17.95 billion. Its earnings for third-quarter fiscal 2022 surpassed the Zacks Consensus Estimate by 37.7%.
In the past five years, the company’s earnings have registered a 34.1% increase, way ahead of the industry’s 10.9% rise and the S&P 500’s 13.4% increase. The company’s long-term expected growth is estimated at 15.2%, compared with the industry’s growth expectation of 15.1% and the S&P 500’s estimated 11.2% growth.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors At Play
Q3 Upsides: Hologic delivered better-than-expected revenues and earnings for the fiscal third quarter. Within the Diagnostics arm, the cytology and perinatal businesses delivered strong results as patients resumed Well Woman exams after prolonged delays during high COVID prevalence. The company’s Panther installed base stood at 3,200 instruments worldwide, per the fiscal third quarter’s earnings update. Hologic’s raised outlook for fiscal 2022 indicates the continuation of this bullish trend.
Molecular Diagnostics Holds Potential: Hologic’s global molecular diagnostics franchise grew 22%, excluding revenues from COVID-19 tests. The uptick in the molecular diagnostics business was driven by strong uptake of both legacy and new assays, including the BBCVTV vaginitis panel, MGen, CTMG and respiratory menu on the Panther Fusion. Per the company, the vaginitis panel is well-positioned to become one of the top three assays within the molecular diagnostic portfolio over time.
In May 2022, Hologic gained CE marking for the Panther Fusion EBV Quant Assay and the Panther Fusion BKV Quant Assay, extending its transplant pathogen monitoring menu on the Panther Fusion system. The company also gained FDA approval for Aptima CMV Quant assay, which adds to its diagnostic and viral load testing portfolio for HIV-1, Hepatitis C and Hepatitis B.
Strength in GYN Surgical: In the fiscal third quarter, revenues in the GYN Surgical business rose 7.9% year over year (up 9.7% at CER). The business recorded a strong rebound exhibiting positive procedural trends. The upside in the business was primarily driven by MyoSure and Fluent Fluid Management System sales. The acquired businesses of Acessa and Bolder also performed well in the reported quarter. Sales of Accessa procedures improved nearly 50% year-over-year, led by the company’s efforts to increase patient-covered lives to 84%.
Downsides
Dull Sales Scenario: Hologic witnessed a substantial revenue decline during the fiscal third quarter. The decline in the top line can be attributed to lower international COVID-19 assay sales and supply chain challenges in the Breast Health business.
Weak Margins: The contraction of both margins is worrying. In the fiscal third quarter, the company-provided adjusted gross margin contracted 280 basis points (bps) to 63.3%. Adjusted operating margin also contracted 720 bps to 32.3%.
COVID-19 Revenue Uncertainty: Hologic is witnessing a decline in COVID-19 testing following the vaccine rollout. This might significantly pull down the company’s revenues in the upcoming quarters.
Estimate Trend
Hologic has been witnessing a positive estimate revision trend for the fiscal 2022. In the past 90 days, the Zacks Consensus Estimate for Hologic’s fiscal 2022 earnings has moved 6% north to $5.82.
The Zacks Consensus Estimate for its fiscal 2022 revenues is pegged at $4.78 billion, suggesting a 15.2% fall from the year-ago reported number.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , Molina Healthcare, Inc. (MOH - Free Report) and Patterson Companies, Inc. (PDCO - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, on average. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 1.2% against the industry’s 28.8% fall.
Molina Healthcare has a long-term earnings growth rate of 16.4%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 3.2%, on average. It currently carries a Zacks Rank #2 (Buy).
Molina Healthcare has underperformed its industry in the past year. MOH has gained 25.3% against the industry’s 27.4% growth.
Patterson Companies has an estimated long-term growth rate of 7.9%. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 16.5%. It currently flaunts a Zacks Rank #2.
Patterson Companies has outperformed its industry in the past year. PDCO has gained 0.6% compared with the industry’s 6.3% fall in the past year.
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Here's Why Investors Should Retain Hologic (HOLX) Stock for Now
Hologic, Inc. (HOLX - Free Report) is gaining from continued strength in GYN Surgical business. The company’s earnings and revenues for the third quarter of fiscal 2022 beat the Zacks Consensus Estimate. The company gained regulatory approvals in the fiscal third quarter, instilling optimism. However, declining sales and weak margins do not bode well.
In the past year, the Zacks Rank #3 (Hold) stock has lost 6.7% against a 24.1% fall of the industry and a 4.1% drop of the S&P 500.
The renowned medical device company has a market capitalization of $17.95 billion. Its earnings for third-quarter fiscal 2022 surpassed the Zacks Consensus Estimate by 37.7%.
In the past five years, the company’s earnings have registered a 34.1% increase, way ahead of the industry’s 10.9% rise and the S&P 500’s 13.4% increase. The company’s long-term expected growth is estimated at 15.2%, compared with the industry’s growth expectation of 15.1% and the S&P 500’s estimated 11.2% growth.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors At Play
Q3 Upsides: Hologic delivered better-than-expected revenues and earnings for the fiscal third quarter. Within the Diagnostics arm, the cytology and perinatal businesses delivered strong results as patients resumed Well Woman exams after prolonged delays during high COVID prevalence. The company’s Panther installed base stood at 3,200 instruments worldwide, per the fiscal third quarter’s earnings update. Hologic’s raised outlook for fiscal 2022 indicates the continuation of this bullish trend.
Molecular Diagnostics Holds Potential: Hologic’s global molecular diagnostics franchise grew 22%, excluding revenues from COVID-19 tests. The uptick in the molecular diagnostics business was driven by strong uptake of both legacy and new assays, including the BBCVTV vaginitis panel, MGen, CTMG and respiratory menu on the Panther Fusion. Per the company, the vaginitis panel is well-positioned to become one of the top three assays within the molecular diagnostic portfolio over time.
In May 2022, Hologic gained CE marking for the Panther Fusion EBV Quant Assay and the Panther Fusion BKV Quant Assay, extending its transplant pathogen monitoring menu on the Panther Fusion system. The company also gained FDA approval for Aptima CMV Quant assay, which adds to its diagnostic and viral load testing portfolio for HIV-1, Hepatitis C and Hepatitis B.
Strength in GYN Surgical: In the fiscal third quarter, revenues in the GYN Surgical business rose 7.9% year over year (up 9.7% at CER). The business recorded a strong rebound exhibiting positive procedural trends. The upside in the business was primarily driven by MyoSure and Fluent Fluid Management System sales. The acquired businesses of Acessa and Bolder also performed well in the reported quarter. Sales of Accessa procedures improved nearly 50% year-over-year, led by the company’s efforts to increase patient-covered lives to 84%.
Downsides
Dull Sales Scenario: Hologic witnessed a substantial revenue decline during the fiscal third quarter. The decline in the top line can be attributed to lower international COVID-19 assay sales and supply chain challenges in the Breast Health business.
Weak Margins: The contraction of both margins is worrying. In the fiscal third quarter, the company-provided adjusted gross margin contracted 280 basis points (bps) to 63.3%. Adjusted operating margin also contracted 720 bps to 32.3%.
COVID-19 Revenue Uncertainty: Hologic is witnessing a decline in COVID-19 testing following the vaccine rollout. This might significantly pull down the company’s revenues in the upcoming quarters.
Estimate Trend
Hologic has been witnessing a positive estimate revision trend for the fiscal 2022. In the past 90 days, the Zacks Consensus Estimate for Hologic’s fiscal 2022 earnings has moved 6% north to $5.82.
The Zacks Consensus Estimate for its fiscal 2022 revenues is pegged at $4.78 billion, suggesting a 15.2% fall from the year-ago reported number.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , Molina Healthcare, Inc. (MOH - Free Report) and Patterson Companies, Inc. (PDCO - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, on average. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 1.2% against the industry’s 28.8% fall.
Molina Healthcare has a long-term earnings growth rate of 16.4%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 3.2%, on average. It currently carries a Zacks Rank #2 (Buy).
Molina Healthcare has underperformed its industry in the past year. MOH has gained 25.3% against the industry’s 27.4% growth.
Patterson Companies has an estimated long-term growth rate of 7.9%. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 16.5%. It currently flaunts a Zacks Rank #2.
Patterson Companies has outperformed its industry in the past year. PDCO has gained 0.6% compared with the industry’s 6.3% fall in the past year.