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Is a Surprise in Store for Hologic (HOLX) in Q2 Earnings?

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Hologic Inc. HOLX is slated to report second-quarter fiscal 2017 financial results on May 10, after the closing bell.
 
Last quarter, the company posted a positive earnings surprise of 1.96%. Notably, Hologic’s earnings surpassed the Zacks Consensus Estimate in all of the past four quarters, with an average beat of 4.16%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Hologic’s first-quarter 2017 results were quite impressive on both the top and the bottom-line fronts. The company is upbeat about the strong performance in the U.S. as well. Segment-wise, Hologic witnessed growth across most of its business segments. We expect the company to maintain the bullish trend in the second quarter of 2017.

Hologic, Inc. Price and EPS Surprise

 

Hologic, Inc. Price and EPS Surprise | Hologic, Inc. Quote

On a positive note, the company completed the sale of its loss-making blood screening business to commercial partner. We are happy with the closure of this selloff as blood screening business remained a drag for the company’s overall topline performance in the recent past. We believe, now on the company should start to get the benefit of this selloff.

The company also completed the acquisition of Cynosure, Inc., a medical aesthetics systems and technologies company. We expect this development to boost the top line in the second quarter of 2017.

Coming to product launches, in the second quarter the company introduced the next-generation NovaSure ADVANCED global endometrial ablation (GEA) system in the U.S. The system has been FDA approved. This should also boost the upcoming quarterly results.

We are also upbeat about Hologic’s several recent regulatory approvals for its Aptima assay series. The company obtained CE mark for Aptima Zika Virus diagnostic assay. Consequently, the FDA granted PMA approval for another of Hologic’s Aptima Hepatitis C Quant Dx Assays during the second quarter.

On the flip side, Hologic had to face several challenges owing to unfavorable foreign currency impact that has been affecting the company’s overall performance over the past few quarters. In 2017, foreign exchange headwind is expected to result in reduction of over $20 million.

Moreover, escalating operating expenses and intense competition, particularly in the tomosynthesis market, continue to be concerns for Hologic. For quite some time now, the company witnessed several challenges such as restricted capital spending environment, economic uncertainties in Europe, slower sales cycles and increasing pricing pressure. We expect these problems to linger in the upconing quarters as well.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Hologic. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP:  Hologic has an Earnings ESP of 0.00%.That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 46 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Hologic has a Zacks Rank #1 which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Best Buy Co. Inc. BBY has an Earnings ESP of +12.50% and a Zacks Rank #3. Additionally, on an average, the stock represented a positive surprise of almost 27.70% in the trailing four quarters.

Global Partners LP GLP has an Earnings ESP of +233.33% and a Zacks Rank #1. The stock represented a positive surprise of almost 96.55% in the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Raymond James Financial, Inc. (RJF - Free Report) has an Earnings ESP of +3.45% and a Zacks Rank #1. The stock represented a positive surprise of almost 14.4% in the last four quarters.

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