Hologic, Inc. HOLX has been on a healthy growth trajectory of late. The company’s progress in the domestic and international markets, a strong pipeline of products as well as huge prospects of the GYN Surgical and Molecular Diagnostics segments make it an attractive pick. Thus, this Zacks Rank #2 (Buy) stock has solid prospects in the near term.
Over the past year, the company’s share price has outperformed its industry. The stock has gained 22.7% in comparison with the industry’s 12.2% rise and the S&P 500’s 3.2% increase.
The stock has a market cap of $13.68 billion. The company’s expected growth rate for three to five years is 8.9%.
Let’s find out whether the recent favorable trend is a sustainable one.
What’s Working in Favor of the Stock?
Molecular Diagnostics Sees Consistent Growth
Hologic’s management is impressed with continued growth in the core Molecular Diagnostics sub-segment, which accounted for roughly 55.4% of total Diagnostics revenues in the fiscal first quarter. Molecular Diagnostics sales increased 11.2% at CER.
Global growth was driven by expanding market share and utilization of fully automated Panther system along with continued solid uptake of Aptima women's health products. Per management, the company has more than 15 FDA-cleared or CE-marked tests to run on the Panther or Panther Fusion platforms. In January, Hologic received FDA approval for Aptima Mycoplasma genitalium assay.
GYN Surgical Continues to See Growth
After a dull performance in the first half of fiscal 2018, the company has been showing gradual improvement in the GYN Surgical business. Although NovaSure sales declined, we are upbeat about the solid quarterly show by MyoSure. New leadership, easier comparisons and revamped sales and marketing efforts along with product launches are expected to drive growth.
Per Hologic, MyoSure has gained the reputation of being the largest product line in the Surgical business. This product line has been consistently delivering strong performance and has seen high-single-digit growth in the fiscal first quarter.
Hologic expects its surgical business to witness strong growth on continued expansion of MyoSure suite of products, stability in NovaSure and growing international business.
In order to streamline operations and reduce cost of revenue, Hologic has been adopting strategies over the past few years. The company has invested in commercial areas where management has recognized solid returns. In this regard, Hologic has invested in the Genius marketing campaign in Breast Health, cervical cancer co-testing initiatives in Diagnostics, along with efforts to gain market share with NovaSure.
Per management, these initiatives are paying off through increased brand awareness, market share gains and price stability, all of which will result in higher sales.
Other Key Picks
Other top-ranked stocks in the broader medical space are Varian Medical Systems VAR, Illumina, Inc. ILMN and DexCom, Inc DXCM. Notably, each of these stocks currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Varian’slong-term earnings growth rate is projected at 8%.
Illumina’slong-term earnings growth rate is expected at 21.5%.
DexCom’s second-quarter earnings per share are estimated to grow 160%.
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