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Hologic (HOLX) Q4 Earnings Miss, Revenues Top Estimates

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Hologic, Inc. (HOLX - Free Report) reported fourth-quarter fiscal 2018 adjusted earnings per share (EPS) of 58 cents, up 16% year over year. However, the bottom line missed the Zacks Consensus Estimate by a penny and met the lower end of the company’s guided range of 58-60 cents.

On a reported basis, the company recorded net income of 18 cents per share compared with 29 cents in the year-ago period.

Revenues in Detail

Revenues grossed $813.5 million in the reported quarter, up 1.3% year over year (up 1.7% at constant exchange rate or CER). The top line also surpassed the Zacks Consensus Estimate of $805 million as well as the lower end of the company’s projection of $800-$815 million.

Notably, Hologic’sprior-year numbers were benefited  by higher sales from the company’s divested Blood Screening business and its non-recurring royalty revenues of $9.5 million in Molecular Diagnostics, which more than offset an extra selling day in the reported quarter.

Hologic, Inc. Price, Consensus and EPS Surprise

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

Geographically, revenues in the United States inched up 0.3% year over year to $615.1 million in the fiscal fourth quarter. International revenues were up 4.5% (up 6.3% at CER) to $207.2 million, primarily on a strong contribution from the Molecular Diagnostics, Breast Health and and Surgical business.

Segments in Detail

Revenues at the Diagnostics segment (representing 35.5% of total revenues) slid 1% year over year (up 0.5% at CER) to $288.9 million in the quarter under review. Under this segment, Molecular Diagnostics revenues of $158 million increased 2.9% (up 3.4% at CER) fueled by strong international performance However, Cytology and Perinatal revenues with $118 million showed a 1.8% slip (down 1.2% at CER).

Revenues at the Breast Health segment (39.6%) increased 7.1% (up 7.4% at CER) to $322.2 million. This metric in the United States grew 5.4%, registering the best growth rate over the last seven quarters. Internationally, Breast Health revenue growth was in the mid-teens.  

Revenues at the GYN Surgical business (13.2%) grew 2.6% (up 3.1% at CER) to $107.4 million. Medical Aesthetic business in the reported quarter logged revenues of $70.6 million, reflecting a 12.9% decline.

Revenues at Skeletal Health (accounting for the rest) inched up .8% (up 1.4% at CER) to $24.4 million.

Operational Update

In the fiscal fourth quarter, Hologic’s adjusted gross margin contracted 25 basis points (bps) to 61.7%. This downside was primarily due to an adverse geographic and product sales mix, non-recurring royalties included in the prior-year period plus refunds and rebates associated with the company’s TempSure Vitalia products.

Hologic’s adjusted operating expenses amounted to $304 million, up 4.6% year over year. Adjusted operating margin contracted 144 bps to 24.3%.

Financial Update

Hologic exited fiscal 2018 with cash and cash equivalents of $666.7 million compared with $540.6 million at the end of fiscal 2017. Total long-term debt was $3.30 billion at the end of fiscal 2018 compared with $3.32 billion a year ago.

At the end of the full year, the company generated operating cash flow of $732.9 million compared with $8.3 million in the prior-year period. 

Guidance

Hologic has provided its fiscal 2019 financial guidance. The company expects adjusted revenues of $3.29-$3.33 billion (expected growth rate of 2.8-4.2% at CER). The Zacks Consensus Estimate for revenues is pegged at $3.32 billion, within but near to the upper end of the guided range.

The company also envisions adjusted EPS of $2.38-$2.42 (a projection of 6.7-8.5% growth rate). The consensus mark for the metric stands at $2.41, falling within the estimated range.

For first-quarter fiscal 2019, Hologic anticipates adjusted revenues of $800-$815 million, indicating 1.6-3.5% expected growth at CER. The consensus estimate for revenues is $822.2 million, lying above the projected range.

Adjusted EPS is predicted at 55-57 cents, reflecting annualized growth of 0-3.6%. The Zacks Consensus Estimate for first-quarter adjusted EPS is pegged at 59 cents, higher than the company’s forecast.

Our Take

Hologic exited the fiscal 2018 on a mixed note with fourth-quarter earnings missing the Zacks Consensus Estimate while revenues exceeding the mark. Tough year-ago comparison along with sluggish Diagnostics sales in the reported quarter hampered the overall performance for the company. On a positive note, a solid uptick in its international business buoys optimism. Also, an improvement in the Surgical and Cynosure businesses is encouraging.

Zacks Rank & Key Picks

Hologic carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the broader medical space, which reported solid earnings this season, are Intuitive Surgical (ISRG - Free Report) , Stryker Corporation (SYK - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical reported third-quarter 2018 adjusted EPS of $2.83, which beat the Zacks Consensus Estimate of $2.65. Revenues totaled $920.9 million, also surpassing the consensus estimate of $918.6 million.

Stryker posted third-quarter 2018 adjusted EPS of $1.69, outpacing the Zacks Consensus Estimate of $1.68. Operating margin was 17.8%, up 30 bps.

Merit Medical delivered third-quarter 2018 adjusted EPS of 47 cents, which trumped the Zacks Consensus Estimate of 42 cents. Revenues of $221.6 million edged past the consensus estimate of $218 million.

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