It has been about a month since the last earnings report for Hologic (HOLX Quick QuoteHOLX - Free Report) . Shares have lost about 3.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Hologic due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Hologic's Q3 Earnings Exceed Estimates, Margins Rise

Hologic, Inc. reported adjusted earnings per share of $1.06 in the third quarter of fiscal 2024, up 14% year over year. The bottom line surpassed the Zacks Consensus Estimate by 3.9%.

The adjustments include charges and benefits related to the amortization of acquired intangible assets, restructuring and integration/consolidation costs, product line discontinuation and many others.

The company’s GAAP earnings were 82 cents per share in the quarter compared to the year-ago quarter’s loss of 16 cents.

Revenues in Detail

Revenues totaled $1.01 billion in the said quarter, up 2.7% year over year (up 3.1% at the constant exchange rate or CER). The metric surpassed the Zacks Consensus Estimate by 1.1%.

Geographical Revenue Analysis

In the fiscal third quarter, U.S. revenues totaled $765.3 million, an increase of 2%. This topped our model’s projection of $752.4 million for this region.

International revenues amounted to $246.1 million, up 5.1% year over year and up 6.4% at CER. Our model’s projection was $247.8 million.

Segments in Detail

Revenues in the Diagnostics segment increased 0.3% year over year (up 0.7% at CER) to $440.8 million in the quarter under review. Excluding COVID-19 revenues, Diagnostics revenues increased 5.5% on a reported basis. This compares with our model’s segmental projection of $438.5 million.

Within the division, Cytology & Perinatal revenues of $122.2 million were down 2.9% at CER. This compares with our model’s segmental projection of $109.8 million.

Molecular Diagnostics revenues of $310.7 million increased 3.1% at CER. Blood Screening revenues of $7.9 million fell 26.2% year over year at CER. Our model projected $321.4 million and $7.3 million for Molecular Diagnostics and Blood Screening, respectively, for the fiscal third quarter. 

Revenues in the Breast Health segment increased 6.9% from the year-ago period’s (up 7.1% at CER) levels to $385 million, primarily driven by the Breast Imaging business, which posted solid domestic and international results.

Our model projected revenues of $372.5 million for this segment. Excluding SSI, Breast Health revenues increased 7.9%, or 8.2%, at constant currency.

Revenues in the GYN Surgical business rose 5.9% year over year (up 6.2% at CER) to $166.6 million, primarily driven by the solid sales of MyoSure and Fluent Fluid Management. Our model projected revenues of $168.5 million in this segment.

Revenues at Skeletal Health declined 29.9% year over year (down 29.7% at CER) to $19 million. Our model projected revenues of $20.6 million for this segment.

Operational Update

In the fiscal third quarter, the company-provided adjusted gross margin increased by 30 basis points (bps) to 61.1%, despite COVID-19 assay revenue declines being a headwind consistently.

The company’s adjusted operating margin was 31.2%, an expansion of 230 bps, primarily due totop-line growth, expanding gross margins and lower operating expenses.

Financial Update

Hologic ended the third quarter of fiscal 2024 with cash and cash equivalents of $2.44 billion compared with $2.18 billion in the second quarter of 2024.

Total long-term debt (including the current portion) was $2.54 billion, slightly down from $2.55 billion in the second quarter of fiscal 2024.

Net cash provided by operating activities at the end of the fiscal third quarter was $918.2 million compared with $792.5 million a year ago.

Guidance

Hologic provided an updated guidance for fiscal 2024 and initiated an outlook for the fourth quarter.

For fiscal 2024, the company projects revenues in the band of $4.012-$4.027 billion (previous guidance was $4.000-$4.050 billion). This indicates year-over-year growth in the range of (0.4%)-(0.1%) on a reported basis, (0.5%)-(0.1%) at CER and 5.2%-5.6% organically. The Zacks Consensus Estimate for fiscal 2024 revenues is pegged at $4.04 billion.

Adjusted earnings per share for fiscal 2024 is estimated in the band of $4.04-$4.11 (previously $4.02-$4.12), with projected growth of 2%-3.8% year over year. The Zacks Consensus Estimate for the fiscal 2024 EPS is pegged at $4.08.

For the fourth quarter of fiscal 2024, the company projects revenues between $970 million and $985 million, which suggests year-over-year growth in the range of 2.6%-4.2% on a reported basis, 2.9%-4.5% at CER and 5%-6.6% organically. The Zacks Consensus Estimate for fourth-quarter fiscal 2024 revenues is pegged at $1.00 billion.

Adjusted earnings per share for the fourth quarter is estimated between 97 cents and $1.04, which suggests an increase of 9%-16.9% year over year. The Zacks Consensus Estimate for the metric is pegged at $1.05.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Hologic has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hologic has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Hologic is part of the Zacks Medical - Instruments industry. Over the past month, Edwards Lifesciences (EW Quick QuoteEW - Free Report) , a stock from the same industry, has gained 9.4%. The company reported its results for the quarter ended June 2024 more than a month ago.

Edwards Lifesciences reported revenues of $1.39 billion in the last reported quarter, representing a year-over-year change of -9.4%. EPS of $0.70 for the same period compares with $0.66 a year ago.

For the current quarter, Edwards Lifesciences is expected to post earnings of $0.68 per share, indicating a change of +15.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.

Edwards Lifesciences has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.