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Hologic (HOLX) Beats on Q3 Earnings, Ups '19 Revenue View

Zacks Equity Research

Hologic, Inc. HOLX reported third-quarter fiscal 2019 adjusted earnings per share (EPS) of 63 cents, up 8.6% year over year. The bottom line also surpassed the Zacks Consensus Estimate by 3.3%.

However, on a reported basis, the company’s earnings of 35 cents per share reflect a 14.6% drop from the year-ago quarter.

Revenues in Detail

Revenues grossed $852.4 million in the reported quarter, up 3.4% year over year (up 4.7% at constant exchange rate or CER). Excluding the divested Blood Screening business, total revenues came in at $838.2 million, up 4.1%year over yearand 5.3% at CER.

The Zacks Consensus Estimate for third-quarter total revenues is pegged at $834.63 million.

Hologic, Inc. Price, Consensus and EPS Surprise

Hologic, Inc. Price, Consensus and EPS Surprise

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

U.S. revenues of $642.5 million increased 4.2%. Additionally, international revenues of $209.9 million inched up 1.3% or 6.2% in constant currency.

Geographically, revenues in the United States rose 4.2% year over year to $642.5 million in the quarter. Global revenues were up 1.3% (up 6.2% at CER) to $209.9 million as well, primarily on the back of strong contributions from the Diagnostics and GYN Surgical businesses.

Segments in Detail

Revenues at the Diagnostics segment rose 3.8% year over year (up 5.1% at CER) to $305.4 million in the quarter under review with Molecular Diagnostics being the major driver. Molecular Diagnostics revenues of $170.9 million climbed 10.6% (up 11.7% at CER), marking the third consecutive quarter of double-digit constant currency growth despite a challenging prior-year comp. However, Cytology and Perinatal revenues of $120.3 million registered a 0.7% dip (up 1.3% at CER).

Revenues at the Breast Health segment increased 5.7% (up 6.7% at CER) to $325.4 million. While domestic sales drove Breast Health growth in the quarter with 8.9% revenue rise year over year, outside the United States, Breast Health sales dipped 1.5%, primarily due to the challenges in Latin America.

Although revenues at the GYN Surgical business grew 4.2% (up 5.2% at CER) to $112.2 million, Medical Aesthetic business revenues of $85 million reflects a 7.3% decline (down 5.5% at CER) in the reported quarter.

Revenues at Skeletal Health fell 8.2% (up 9.8% at CER) to $24.4 million.

Operational Update

In the fiscal third quarter, Hologic’s adjusted gross margin contracted 114 basis points (bps) to 61.4%. This downside was primarily due to the strong U.S. dollar, trade tariffs in China, an adverse product sales mix, especially related to Cynosure's performance, and increased service costs.

Adjusted operating expenses amounted to $239 million, up 2.1% year over year. Also, adjusted operating margin contracted 36 bps to 27.9%.

Financial Update

Hologic exited the third quarter of fiscal 2019 with cash and cash equivalents of $427.9 million compared with $401 million at the end of second-quarter fiscal 2019. Total long-term debt was $3.05 billion in the reported quarter compared with $3.09 million at the end of the year-ago quarter.

Year to date, net cash provided by operating activities was $401.8 million compared with $500.5 million a year ago.

Guidance Updated

Hologic has updated its fiscal 2019 financial guidance. The company now expects adjusted revenues in the range of $3.33-$3.35 billion, up from the earlier-announced band of $3.32-$3.34 billion (a projection of 4.7-5.2% growth at CER).

The Zacks Consensus Estimate for revenues stands at $3.33 billion, in line with the lower end of the guided range.

The company envisions adjusted EPS of $2.42-$2.44 narrowed from $2.41-$2.44 guided previously (a projection of 8.5-9.4% growth rate). The consensus mark for the metric is pinned on $2.42 within the estimated range.

For fourth-quarter fiscal 2019, Hologic anticipates adjusted revenues of $834-$849, indicating 3.5-5.3% growth at CER. The consensus estimate for revenues stands at $847.76 million within the forecast range.

Adjusted EPS is predicted at 64-66 cents, suggesting growth of 10.3-13.8% from the year-ago period. The Zacks Consensus Estimate for fourth-quarter fiscal adjusted EPS is pegged at 65 cents within the company’s expected range.

Our Take

Hologic exited the third quarter of fiscal 2019 on a solid note. Strong top-line growth was led by a solid year-over-year rise in core businesses like Breast Health and Molecular Diagnostics. We are also upbeat about the recent launches like Aptima BV and Aptima CV/TV assays in the United States, the Trident HD specimen radiography system in the United States, Europe and Canada, and the ThinPrep Genesis processor for cytology slide and molecular test preparation in Europe.

On the flip side, both margins contracted in the quarter under review.

Zacks Rank and Other Key Picks

Hologic currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks, which reported solid results this earnings season are Stryker Corporation SYK, Baxter International Inc. BAX and Intuitive Surgical, Inc. ISRG.

Stryker delivered second-quarter 2019 adjusted earnings per share of $1.98, beating the Zacks Consensus Estimate by 2.6%. Revenues of $3.65 billion also surpassed the Zacks Consensus Estimate by 1.4%. The company carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Baxter delivered second-quarter 2019 adjusted earnings of 89 cents per share, which surpassed the Zacks Consensus Estimate of 81 cents by 9.9%. Moreover, revenues of $2.84 billion outpaced the Zacks Consensus Estimate of $2.79 billion by 1.9%. The company is a Zacks #2 Ranked player.

Intuitive Surgical reported second-quarter 2019 adjusted earnings per share of $3.25, which beat the Zacks Consensus Estimate of $2.85. Further, revenues were $1.1 billion, surpassing the Zacks Consensus Estimate of $1.03 billion. The company sports a Zacks Rank #1.

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