It has been about a month since the last earnings report for Hologic, Inc. (HOLX - Free Report) . Shares have lost about 4.5% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is HOLX due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Hologic reported first-quarter fiscal 2018 adjusted earnings per share (EPS) of 55 cents, up 5.8% year over year. Moreover, adjusted EPS beat the Zacks Consensus Estimate by 12.2% and surpassed the company’s guidance of 48-50 cents.
On a reported basis, the company recorded EPS of $1.45, compared to 30 cents in first-quarter fiscal 2017. Notably, the reported figure includes a one-time tax provision net benefit of $329.2 million, courtesy of the U.S. tax reform.
Revenues in Detail
Revenues grossed $791.1 million in the quarter, up 7.7% year over year (up 6.7% at constant exchange rate or CER). The top line also exceeded the Zacks Consensus Estimate of $787.7 million and the company’s guidance of $775-$790 million.
Solid contributions from Hologic’s Molecular Diagnostics, Breast Health and international business drove the top line.
Geographically, revenues in the United States grew 4.1% year over year to $597.2 million. Excluding blood screening and medical aesthetics, U.S. revenues declined 0.8%. International revenues were up 20.6% (up 15.8% at CER) to $193.9 million, banking on strong contribution from Cynosure.
Excluding blood screening and medical aesthetics, international revenues increased 17.6% or 11.6% at constant currency.
Segments in Detail
Revenues at the Diagnostics segment (35.9% of total revenues) declined 12.5% year over year (down 13.5% at CER) to $284.6 million in the first quarter. Under this segment, Molecular Diagnostics revenues of $148.6 million increased 6.2% (5.3% at CER). The global growth at Molecular Diagnostics was primarily driven by an increasing market share and utilization of fully automated Panther system along with continued solid uptake of Aptima women's health products.
Cytology and Perinatal revenues of $123.4 million also showed a rise of 2.6% (up 0.9% at CER).
Revenues at the Breast Health segment (36.4%) inched up 5.4% (up 4.2% at CER) to $288 million. Revenues in the United States slipped 1%. In the reported quarter, changes in product mix were partially offset by increases in service and new product revenues. International revenues however climbed 29.2% year over year at CER.
Revenues from the GYN Surgical business (13.6%) were down 6.4% (down 7.1% at CER) to $107.5 million. Medical Aesthetic business in the quarter reported revenues of $91.3 million, determining 11.5% of total revenues. Revenues at Skeletal Health (accounting for the rest) decreased 6% (down 7.3% at CER) to $19.7 million.
In the fiscal first quarter, Hologic’s gross margin contracted 140 basis points (bps) to 53.7%. Adjusted gross margin also decreased 140 bps to 63.8% due to the divestiture of blood screening business and revenues from low-margin Cynosure products.
Hologic’s adjusted operating expenses amounted to $271.8 million, up 17.6% year over year. Adjusted operating margin contracted a massive 430 bps to 29.4%.
Hologic exited first-quarter fiscal 2018 with cash and cash equivalents of $664.4 million, up from $646 million reported at the end of first-quarter fiscal 2017. Total long-term debt was $2.76 billion at the end of the reported quarter compared with $2.62 billion a year ago.
During the quarter, the company generated operating cash flow of $169.1 million, compared with the year-ago cash flow of $169.6 million.
Hologic has updated its fiscal 2018 financial guidance. The company currently expects adjusted revenues of $3.2-$3.28 billion, growing in the range of 3.9-6.5% compared with the previously provided range of 4-6.6% at CER. The current Zacks Consensus Estimate is $3.25 billion, within the guided range.
Adjusted EPS is expected to grow 9.4-11.8% to $2.22-$2.27 from the previously stated range of 3.4-5.9% to $2.10-$2.15. The current Zacks Consensus Estimate for adjusted EPS is pegged at $2.18, below the guided range.
For second-quarter fiscal 2018, Hologic expects adjusted revenues of $770-$785 million, representing annualized growth of 6.5-8.6% at CER. The current Zacks Consensus Estimate for revenues is pegged at $791.7 million, above the projected range.
Adjusted EPS is projected at 53-54 cents, reflecting an annualized growth of 6-8%. The current Zacks Consensus Estimate for second-quarter adjusted EPS is pegged at 52 cents, below the company’s guidance.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter compared to two lower.
Hologic, Inc. Price and Consensus
At this time, HOLX has a subpar Growth Score of D, however its momentum is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregte VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, HOLX has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.