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Hologic (HOLX) Posts Q2 Preliminary Results, Withdraws View

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Hologic Inc. (HOLX - Free Report) announced preliminary revenue results for second-quarter fiscal 2020 on Apr 7. The company is slated to release its full financial results for the period on Apr 29.

Hologic expects to continue its strong underlying momentum, which it has been witnessing for the past few years. However, for the fiscal second quarter, the company projects a robust performance of two of its business segments and the European franchises. Following the announcement, its shares gained 5.3% to close at $37.77 yesterday.

In the to-be-reported quarter, Hologic expects a decline in total revenues of 7.6% (down 7.1% at constant exchange rate or CER) on a year-over-year basis to $756.1 million due to the Cynosure divestiture. However, excluding acquisitions and divestitures, organic revenues of $735.1 million are expected to increase 0.5% (up 1.1% at CER). The top line is expected to primarily benefit from balanced growth across the majority of Hologic’s segments. The Zacks Consensus Estimate for the metric is currently pegged at $762 million.

 


 

However, given the significant negative impacts on sales in the latter part of March due to the coronavirus pandemic, the company has withdrawn the financial guidance for the second quarter and fiscal 2020, which it had provided with the first-quarter results on Jan 29.

Segmental Preliminary Estimates

While Diagnostics (42.2% of total revenues) is likely to rise 7.6% (8.3% at CER), GYN Surgical (13.9%) is estimated to grow 3.1% (up 3.6% at CER) on a year-over-year basis. However, Breast Health (40.7%) revenues are likely to fall 4.3% (down 3.7% at CER) on a year-over-year basis. Skeletal Health (3.1%) is anticipated to decline 2.1% (down 1.6% at CER) year over year. The uptick in Diagnostics is likely to result from the increasing demand for coronavirus testing.

Notably, the Medical Aesthetics segment no longer reports after the divestiture of Cynosure medical aesthetics business was completed on Dec 30, 2019.

Hologic expects weaker-than-expected sales of Breast Health products due to the changing customer responses amid the COVID-19 outbreak. Additionally, sales of GYN Surgical and Diagnostics products were dented due to the deferral of elective procedures and physician office visits. The company expects the factors to result in lower-than-expected revenues, thus adversely impacting the gross margin. This, in turn, will result in lower-than-expected earnings per share.

Moreover, the company expects adverse impacts to continue in the third quarter of fiscal 2020. Currently, it is undertaking various cost-cutting measures to reduce expenses. However, since the duration of the pandemic is unknown, the company is not in a position to estimate the net financial impacts of the factors.

Share Price Movement

Hologic has underperformed its industry over the past three months. The stock has slipped 29.1% compared with a 14.5% decline of the industry.

Zacks Rank & Stocks to Consider

Hologic currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the broader medical space are ResMed Inc. (RMD - Free Report) , National Vision Holdings, Inc. (EYE - Free Report) and Surmodics, Inc. (SRDX - Free Report) .

ResMed has a projected long-term earnings growth rate of 14.4%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

National Vision’s long-term earnings growth rate is estimated at 10.7%. The company presently has a Zacks Rank #2.

Surmodics’ long-term earnings growth rate is estimated at 10%. It currently carries a Zacks Rank #2.

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