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Can Hologic (HOLX) Diagnostics Growth Recur in Q2 Earnings?

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Hologic, Inc. (HOLX - Free Report) is slated to report second-quarter fiscal 2018 financial results on May 2 after the closing bell. Last quarter, the company delivered a positive surprise of 12.24%. Notably, Hologic’s earnings surpassed the Zacks Consensus Estimate in all the past four quarters with an average beat of 6.26%.

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

Key Catalyst

Within Diagnostics, Hologic once again expects a stellar performance banking on molecular diagnostics.In the United States, the company is likely to gain from an increasing market share as well as utilization of fully automated Panther system along with market expansion by conforming to the testing guidelines.

Global growth within molecular diagnostics can be attributed to the Panther system, Hologic’s fully automated molecular diagnostics instrument and also owing to a frequent utilization of Aptima women’s health assays. Notably, Aptima assays have gained a huge customer base in testing for chlamydia and gonorrhea, HPV (human papillomavirus) and trichomonas. We are also hopeful about Hologic’s expanded market for sexually transmitted disease testing.

Hologic, Inc. Price and EPS Surprise

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


Further, we are upbeat about Diagnostics business earning a regulatory clearance for several new products in the United States over the last six quarters. These include the first three respiratory assays on new Fusion platform and three viral load tests for HIV (for human immunodeficiency virus), hepatitis C and hepatitis B. This steady pace of domestic assay innovation strengthens the company’s position to consolidate molecular testing on the Panther system. In January, the company again announced the PMA approval for the Aptima HBV Quant Assay for quantitation of hepatitis B viral load on the fully automated Panther system.

All the above developments are anticipated to contribute significantly to the company’s topline in the to-be-reported quarter.

The Zacks Consensus Estimate of $155 million for Molecular Diagnostics revenues reflects an increase of 9.2% from the year-ago quarter.

Other few factors likely to influence Hologic’s results in the fiscal second quarter are as follows:

Hologic is optimistic about sustaining a solid earnings trend in 2018 courtesy of gains from the Breast Health segment. Sales from the same have improved on the basis of an established clinical superiority of the segmental products over the last three quarters. The company has witnessed a consistent rise in market share within Breast Health on the back of direct-to-consumer initiativesand insurance coverage.

Additionally, the company’s adoption of new mammography systems, 3Dimensions and 3D Performance, encourages us. These new products have already started to leverage the company’s Genius brand and also lured customers to upgrade their existing 2D systems. The company is building a broader portfolio of Breast Health products and services around the core of Genius systems so that it can play an instrumental role in the Breast Health continuum of care. Noteworthy in this regard is the recent PMA approval from the FDA for Clarity HD high-resolution 3D imaging and Intelligent 2D imaging technology. These products are now available in the 3Dimensions breast tomosynthesis system.

The Zacks Consensus Estimate of $293 million for the second quarter of fiscal 2018 remains 4.3% ahead of the prior-year tally.

On the flip side, Hologic confronted challenges related to unfavorable foreign currency movement over the past few quarters. Escalating operating expenses and an intense competition, particularly in the tomosynthesis market, continue to raise a concern.

What Our Model Suggests

Per the proven Zacks model, a company with a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has higher chances of beating estimates if it also has a positive Earnings ESP.

Hologic has a Zacks Rank #3, which increases the predictive power of ESP and an Earnings ESP of +0.94%, which raises confidence about a positive surprise. Together, the combination suggests that the company is likely to beat on earnings this quarter. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Other Stocks Worth a Look

Here are a few other medical stocks worth considering with the right combination of elements to also surpass estimates this time around:

Baxter International Inc. (BAX - Free Report) has an Earnings ESP of +0.86% and a Zacks Rank #2.

Laboratory Corporation of America Holdings (LH - Free Report) has an Earnings ESP of +1.52% and a Zacks Rank of 2.

Stryker Corporation (SYK - Free Report) has an Earnings ESP of +0.13% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

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