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Can Diagnostics Aid Hologic (HOLX) Q3 Earnings Amid Coronavirus?

Zacks Equity Research
·5 mins read

Hologic, Inc. HOLX is slated to report third-quarter fiscal 2020 results on Jul 29, after the closing bell.

In the last-reported quarter, the company’s earnings of 57 cents outpaced the Zacks Consensus Estimate. Moreover, its earnings surpassed the consensus estimate in two of the last four quarters and met the mark in the other two. The trailing four-quarter average surprise was 2.21%.

Let's see how things are shaping up prior to the announcement.

Factors at Play

Lower sales at Breast Health are expected to continue given the changing customer responses amid the COVID-19 outbreak. Additionally, sales of GYN Surgical and certain non COVID-19 Diagnostics products are expected to have been significantly dented in the third quarter due to the deferral of elective procedures and physician office visits.

Hologic, Inc. Price and EPS Surprise

Hologic, Inc. Price and EPS Surprise
Hologic, Inc. Price and EPS Surprise

Hologic, Inc. price-eps-surprise | Hologic, Inc. Quote


Overall, the company expects its Diagnostics segment to have maintained a stellar performance in the fiscal third quarter on robust performance by its new Molecular Diagnostics testing products for coronavirus. Notably, in the fiscal third quarter, Hologic received the FDA’s Emergency Use Authorization for its Aptima SARS-CoV-2 assay, which runs on its Panther system. Similar to the fiscal second quarter, the company expects global Molecular Diagnostics revenues in the third quarter to reflect the benefits of additional tests, including the COVID-19 assays, onto Hologic’s Panther installed base.

The Molecular Diagnostics segment is likely to have maintained robust growth in the fiscal third quarter, which in the second quarter was driven by cervical cancer co-testing in Germany and viral load testing in Africa.

The company’s Panther Fusion platform has likely maintained momentum, 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 $241 million, suggesting a 40.9% increase from the year-ago quarter’s reported level.

Meanwhile, let us delve deeper into how the other core business segments have fared during the third quarter.

GYN Surgical

Hologic is expected to have maintained its U.S. Surgical’s performance in the fiscal third quarter despite continued impact of the pandemic. Notably, the segment recorded a significant impact on demand since late-March as elective procedures were postponed.

Outside the United States, organic revenues are likely to have been strong in the fiscal third quarter as was the case in the second quarter, reflecting strong foundations built by Hologic for sustainable growth. However, some impact on global revenues is likely, given the continuation of the pandemic and widespread lockdowns.

The company confirmed during its fiscal second quarter earnings call that it expects the Surgical segment to be the worst-hit in the short-term. Further, Hologic expects global Surgical sales to decline significantly year over year in April.

The Zacks Consensus Estimate for GYN Surgical’s revenues is pegged at $29.8 million, suggesting a 73.4% drop from the year-ago quarter’s reported level.

Breast Health

Hologic confirmed during its fiscal second-quarter earnings call that it expects April sales at the Breast and Skeletal Health segment to significantly decline from the year-ago period, reflecting the impact of the pandemic. However, the company was hopeful that recurring revenues, such as service, will partially offset the steeper decline in capital sales. Hologic was also optimistic about the gradually relaxing access restrictions worldwide. However, as the pandemic continues unabated, the restrictions are being imposed again. This is likely to reflect on the company’s fiscal third-quarter results.

The Zacks Consensus Estimate for the segment’s revenues is pegged at $219 million, indicating a decline of 32.6% from the prior-year quarter’s figure.

Q3 Estimates

The Zacks Consensus Estimate for third-quarter fiscal 2020 revenues is pegged at $595.9 million, suggesting a 30.1% fall from the year-ago figure.

The Zacks Consensus Estimate for the company’s earnings of 36 cents suggests a 42.9% fall from the year-ago figure.

What Our Model Suggests

Our proven model predicts an earnings beat for Hologic this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Zacks Rank: The company currently carries a Zacks Rank #3.

Earnings ESP: Hologic has an Earnings ESP of +12.27%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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.

Integra LifeSciences Holdings Corporation IART has an Earnings ESP of +20.69% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Exact Sciences Corporation EXAS has an Earnings ESP of +6.69% and a Zacks Rank of 2 at present.

Thermo Fisher Scientific Inc. TMO has an Earnings ESP of +14.37% and is a Zacks #1 Ranked stock.

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Hologic, Inc. (HOLX) : Free Stock Analysis Report
 
Integra LifeSciences Holdings Corporation (IART) : Free Stock Analysis Report
 
Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report
 
Exact Sciences Corporation (EXAS) : Free Stock Analysis Report
 
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