Hologic, Inc. (HOLX Quick QuoteHOLX - Free Report) is well-poised for growth in the coming quarters, backed by the strength of the Breast Health division’s portfolio of products and services. The company’s international business has been impressive, having grown 20.9% in the last reported fiscal 2023 third quarter. A highly solvent balance sheet further raises investors’ optimism.

Meanwhile, lower COVID-19 testing revenues in the remaining quarters are likely to pose a headwind to the company’s margins. HOLX’s operations are subjected to macroeconomic uncertainties, which remain a cause of concern.

In the past year, this Zacks Rank #3 (Hold) stock has risen 6.5% compared with the 2% growth of the industry and a 17.6% rise of the S&P 500.

The renowned medical device company has a market capitalization of $17.12 billion. Hologic surpassed earnings estimates in all the trailing four quarters, delivering an average surprise of 19.32%.

Let’s delve deeper.

Factors at Play

Strength in Breast Health: Hologic has been making impressive progress in its Breast Health segment recently, leveraging its strategic expansion efforts to diversify the business across the patient continuum of care. In the third quarter of fiscal 2023, the Breast Health arm registered strong growth, primarily driven by the increased volumes of digital mammography systems, primarily 3D Dimension systems, and related workstation and workflow products, including software.

Image Source: Zacks Investment Research

Further, increased Trident system unit sales and higher Faxitron breast-conserving surgery products aided growth. The company is also witnessing increased sales of its interventional breast solution products, driven by Brevera systems and related needles. In breast service, Hologic’s business continues to grow and is becoming an even larger part of the division's mix.

Focus on International Operations: Hologic makes significant efforts to enter new geographies as many of the company’s best-in-class products command a leading share in the domestic market. HOLX’s international sales have been a major catalyst in the past few years, with the major driver being the molecular diagnostics business. The progress in terms of the placement of Panther instruments worldwide has been highly promising.

Further, Hologic continues to witness the encouraging uptake of its assays like vaginitis panel and virals and tremendous international expansion opportunities. Hologic is also making efforts to expand internationally in breast health, with a focus on gaining market share with the existing 3D and upgradable 2D mammography products, the same products that have established leadership positions in the United States.

Strong Solvency & Capital Structure: At the end of the fiscal 2023 third quarter, the company reported cash and cash equivalents of $2.77 billion and short-term payable debt of $32 million on its balance sheet. This can be treated as an upside for the company amid the ongoing economic downturn as it holds sufficient cash for debt repayment.

The total long-term debt (including the current portion) of $2.79 billion at the end of the fiscal third quarter remained sequentially unchanged.

Downsides

Lower COVID-19 Sales Hamper Growth: During the COVID-19 public health emergency, Hologic launched several assays to detect COVID-19. However, the company is experiencing a continuous decline in COVID-19 testing-related demand and is expected to continue at much lower levels in 2023 as customer testing and therapy and vaccine demand decline.

In the third quarter of fiscal 2023, COVID-19 revenues, which consist of COVID-19 assay revenues and other COVID-19 related revenues and revenues from discontinued products, decreased (74.6%) or (74.4%) in constant currency.

Macroeconomic Concerns: Hologic’s business and results of operations have been and may continue to be adversely impacted by changes in macroeconomic conditions, including inflation, rising interest rates and the availability of capital markets. Uncertainty about global economic conditions, particularly in emerging markets and countries with government-sponsored healthcare systems, may also cause decreased demand for products and services and increased competition, which could result in lower sales volumes.

Estimate Trends

In the past 30 days, the Zacks Consensus Estimate for Hologic’s fiscal 2023 earnings has remained constant at $3.92 per share.

The Zacks Consensus Estimate for HOLX’s fiscal 2023 revenues is pegged at $4.03 billion, suggesting a 17.2% fall from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Haemonetics (HAE Quick QuoteHAE - Free Report) , Intuitive Surgical (ISRG Quick QuoteISRG - Free Report) and Quanterix (QTRX Quick QuoteQTRX - Free Report) .

Haemonetics has an estimated earnings growth rate of 26.1% in fiscal 2024 compared with the industry’s 18.7%. HAE’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 19.39%. Its shares have rallied 19.3% against the industry’s 1.8% fall in the past year.

HAE carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical, carrying a Zacks Rank #2 at present, has a long-term estimated earnings growth rate of 15.7% compared with the industry’s 15.5%. Shares of the company have rallied 54.1% compared with the industry’s 1.9% growth over the past year.

ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 4.19%.

Quanterix, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 62.8% for the current year compared with the industry’s 15.2%. Shares of QTRX have surged 177.7% against the industry’s 1.8% decline over the past year.