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Hologic's Diagnostics Grows Strong, Escalating Costs a Woe

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On Apr 15, we issued an updated research report on Hologic, Inc. (HOLX - Free Report) . The company’s progress in the domestic and international markets plus a strong pipeline of products and a solid performance delivered by its GYN Surgical and Molecular Diagnostics segments bolster our confidence. However, the company continues to struggle with tough competition, particularly in the tomosynthesis market.

The stock carries a Zacks Rank #3 (Hold).

For the past year, Hologic has been outperforming its industry. The stock has rallied 21.7% compared with the 7.5% rise of its industry.

We are also upbeat about the recent product launches like the Omni hysteroscope and Panther Fusion Open Access functionality in the United States, the Panther Fusion Bordetella assay in Europe and the Surgical hand piece for the TempSure radiofrequency system in North America. Backed by a portfolio of differentiated products, the company’s Breast Health business has been going strong.

Management is impressed by a steady growth rate in the core molecular diagnostics sub-segment, which accounted for roughly 55.4% of its total Diagnostics revenues in the first quarter of fiscal 2019. Molecular Diagnostics sales increased 11.2% at CER. Global growth was driven by an expanding market share and the utilization of the fully automated Panther system along with a consistently solid uptake of Aptima women's health products.

The company recently announced making the Open Access functionality available for its Panther Fusion system. It also notified the receipt of a CE Mark for its Panther FusionBordetella assay. Importantly, this assay provides complete automation, efficiency and an excellent test performance to Bordetella detection.

Within GYN Surgical, although NovaSure sales declined, we are upbeat about the solid quarterly uptick by MyoSure. New leadership, easier comparisons and the revamped sales as well as marketing efforts along with product launches are expected to drive growth.

Moreover, to strengthen its product suite, Hologic is working on innovations and product launches. In this regard, Cynosure’s R&D pipeline remains robust.

On the flip side, Hologic is enduring an escalating cost pressure, which persistently left the company's adjusted operating margin stressed. Also, the company operating in a highly competitive landscape is a concern.

Key Picks

Some better-ranked stocks in the broader medical space are Varian Medical Systems , Penumbra, Inc (PEN - Free Report) and Amedisys, Inc (AMED - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Varian’s long-term earnings growth rate is projected at 8%

Penumbra’s long-term earnings growth rate is estimated at 20.9%.

Amedisys’ long-term earnings growth rate is forecast at 19.7%.

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