Can Diagnostics Aid Hologic (HOLX) Q1 Sales Amid Coronavirus?
Hologic, Inc. HOLX is slated to report first-quarter fiscal 2021 results on Jan 27, after the closing bell.
In the last-reported quarter, the company’s earnings of $2.07 outpaced the Zacks Consensus Estimate by 69.7%. Moreover, its earnings surpassed the consensus estimate in three of the last four quarters and met the mark in the other one. The trailing four-quarter average surprise was 45.89%.
Let's see how things are shaping up prior to the announcement.
Factors at Play
Diagnostics
Hologic expects its Diagnostics segment to have maintained a stellar performance in fiscal first quarter on robust performance by its Molecular Diagnostics testing products for coronavirus.
The company, in November 2020, received the FDA’s approval for a diagnostic claim for its Aptima HIV-1 Quant Dx assay. This first dual-claim assay for both diagnosis and viral load monitoring in the United States is expected to have shown high market acceptance through the remaining of the fiscal first quarter.
Hologic, in October 2020, received a $119 million contract from the United States government to expand its production capacity for COVID-19 molecular tests. This is expected to significantly ramp up Hologic’s production capacity, thereby contributing to its top line.
Also in October 2020, the company announced receipt of the amended Emergency Use Authorization for its Aptima SARS-CoV-2 assay. With this, it is now authorized for testing asymptomatic individuals (without symptoms) along with those having symptoms of coronavirus infection. Additionally, the FDA authorized Hologic’s pooling protocol, which was announced on Aug 11, 2020 for symptomatic testing with the Aptima SARS-CoV-2 assay. These are likely to have contributed significantly to the company’s testing capacity, thus driving up revenues.
Hologic, Inc. Price and EPS Surprise
Hologic, Inc. price-eps-surprise | Hologic, Inc. Quote
Similar to the last-reported quarter, the company expects global Molecular Diagnostics revenues in fiscal first quarter to reflect the benefits of additional tests, including the COVID-19 assays, onto Hologic’s Panther-installed base. The company’s Panther and Panther Fusion instruments have likely maintained momentum on continued adoption, thus contributing to the top line. The Molecular Diagnostics segment is expected to have witnessed global growth in the quarter on strength in the Panther system.
The Zacks Consensus Estimate for Molecular Diagnostics’ revenues is pegged at $831 million, suggesting a stupendous upsurge of 364.2% from the year-ago quarter’s reported figure.
GYN Surgical
During fiscal 2020 fourth-quarter earnings call, Hologic confirmed that it had started to witness a quicker-than-expected strengthening of the surgical division. This is likely to have continued during first-quarter fiscal 2021 as the company is in process to address the pent-up demand from hospital customers. This is likely to have driven the top line during the quarter.
Notably, the company launched the Omni Suite in November 2020, which is a comprehensive surgical offering designed to optimize diagnostic and operative hysteroscopy. This is likely to have received favorable customer response, thus contributing to first-quarter revenues.
The Zacks Consensus Estimate for GYN Surgical’s revenues is pegged at $113 million, suggesting a 5% drop from the year-ago quarter’s reported figure.
Breast Health
Management, during the previous earnings call, observed that the Breast Health arm witnessed a faster-than-expected recovery amid pandemic-led challenges. We are optimistic about an improved sequential performance by the segment during fiscal first quarter on the back of increasing diversity of the company’s business cushioning the overall decline. The relaunch of the Brevera biopsy system is likely to have contributed to the interventional business during the to-be-reported quarter.
Meanwhile, Hologic, in December 2020, announced that the SuperSonic MACH 40 ultrasound system is now equipped with 3D ultrasound imaging. The same month, Hologic announced the commercial availability of its Genius AI Detection technology post its FDA approval. The company, in November 2020, equipped its Unifi Analytics platform with innovative updates. The enhanced platform is available as Unifi Analytics 1.2. Hologic announced the commercial launch of its 3DQuorum Imaging Technology, powered by Genius AI, in Europe in October 2020. These developments are expected to have contributed robustly to the company’s Breast Health arm’s revenues.
The Zacks Consensus Estimate for the Breast Health segment’s revenues is pegged at $300 million, indicating a decline of 9.4% from the prior-year quarter’s figure.
Preliminary Q1 Results
Hologic, in its fiscal first-quarter preliminary results released this month, expects total revenues to be approximately $1,609.8 million, implying a projected 89.3% improvement year over year (or up 86.5% at constant exchange rate). Notably, this exceeds the guided range of $1,350-$1,425 million.
The company also expects fiscal first-quarter adjusted earnings per share to be significantly higher than the company-provided guidance of $2.10-$2.25.
On a segmental basis, the Diagnostics arm is expected to continue with its stellar performance. After a dismal performance by the GYN Surgical, Breast Health and Skeletal Health businesses in the last-reported quarter, management expects a rebound in the same with favorable numbers.
Q1 Estimates
The Zacks Consensus Estimate for first-quarter fiscal 2021 revenues is pegged at $1.32 billion, suggesting a 55.7% improvement from the year-ago figure.
The Zacks Consensus Estimate for the company’s earnings of $2.14 suggests an 250.8% upsurge from the year-ago figure.
What Our Model Suggests
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has higher chances of beating estimates. However, this is not the case here as you can see:
Earnings ESP: Hologic has an Earnings ESP of -5.50%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #1.
Stocks Worth a Look
Here are a few medical stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.
DENTSPLY SIRONA Inc. XRAY has an Earnings ESP of +5.65% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Patterson Companies, Inc. PDCO has an Earnings ESP of +1.96% and a Zacks Rank of 2, at present.
Omnicell, Inc. OMCL has an Earnings ESP of +8.86% and is a Zacks #1 Ranked stock.
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