Is a Surprise in Store for Hologic (HOLX) in Q4 Earnings?
Hologic Inc. HOLX is slated to report fourth-quarter fiscal 2016 financial results on Nov 2, after the closing bell.
Last quarter, the company posted a positive earnings surprise of 8.51%. Notably, Hologic’s earnings surpassed the Zacks Consensus Estimate in all of the past four quarters, with an average beat of 5.65%.
Let’s see how things are shaping up prior to this announcement.
HOLOGIC INC Price and EPS Surprise
HOLOGIC INC Price and EPS Surprise | HOLOGIC INC Quote
Factors at Play
Hologic posted a promising third-quarter revenue performance. While its surgical business was the main growth driver, there was significant progress in breast imaging, molecular diagnostics and cytology as well. We expect this top-line trend to be reflected in the yet-to-be-reported quarter results.
Coming to the bottom line, over the recent past, Hologic has demonstrated strong gross and operating margins on the back of aggressive investments in growth plans. Several restructuring initiatives yielded a lower tax rate in the last reported quarter. Also, strong cash flow and market volatility allowed management to buy back more shares. Based on the strong earnings performance in the preceding quarter, the company forecasts sustainable bottom-line growth for the fourth quarter.
The company’s U.S. business is also expected to be a strong contributor to fourth-quarter results. Hologic also enjoys a strong position in the domestic market. We are looking forward to the FDA’s recent approval for the expanded use of Hologic’s Aptima Zika virus assay to be used with urine sample which should boost its molecular diagnostic business in the days ahead.
In the breast health segment, management is optimistic about the future potential of its mammography business, with its 3D Genius system currently catering to only 20% of the concerned market. Post the third quarter of fiscal 2016, Hologic announced data from several studies that show the advantages of Low Dose 3D MAMMOGRAPHY together with C-View software over traditional breast tomosynthesis screening tests in detecting more invasive breast cancer. These study results widen the scope for market expansion for Hologic, which we believe will get duly reflected in its fourth-quarter outcome.
On the flip side, currency headwinds, escalating operating expenses and intense competition, particularly in the tomosynthesis market, continue to raise concern. Sluggish performance in the international breast health and blood screening businesses might hamper the company’s performance in the fourth quarter as well.
Earnings Whispers
Our proven model does not conclusively show that Hologic is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Hologic has an earnings ESP of 0.00%.That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 50 cents.
Zacks Rank: Hologic has a Zacks Rank #2 (Buy) which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat in the upcoming quarter:
Glaukos Corporation GKOS has an earnings ESP of +200% and a Zacks Rank #1 (Strong Buy).
Penumbra, Inc. PEN has an earnings ESP of +45.46% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here
Invuity, Inc. IVTY has an earnings ESP of +1.61% and a Zacks Rank #2.
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