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Why Is Hologic (HOLX) Up 1.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Hologic (HOLX - Free Report) . Shares have added about 1.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Hologic due for a pullback? 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 catalysts.

Hologic Gains Ground on Solid Breast Health Business in Q4

Hologicreported 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’s prior-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.

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 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.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Hologic has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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.




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