Hologic (HOLX) Q1 Earnings Surpass Estimates, Margins Rise
Hologic, Inc. HOLX reported first-quarter fiscal 2021 adjusted earnings per share (“EPS”) of $2.86, up 368.9% year over year. Moreover, the bottom line surpassed the Zacks Consensus Estimate by 33.6%.
The adjustments include charges and benefits related to amortization of acquired intangible assets, MDR expenses, and restructuring and integration/consolidation costs, to name a few.
The company’s GAAP EPS was $2.50 in the quarter compared with the year-ago EPS of $1.43, reflecting a 74.8% improvement.
Revenues in Detail
Revenues grossed $1.61 billion in the reported quarter, up 89.3% year over year (up 86.5% at constant exchange rate or CER), including revenues from the divested Medical Aesthetics business in the year-ago period. The metric was in line with the Zacks Consensus Estimate.
Excluding the divested Blood and Medical Aesthetics businesses, total revenues were $1.60 billion, up 107.2% year over year and 104.1% at CER.
Organic revenues (excluding divestitures and the Acessa acquisition) of $1.60 billion increased 107% year over year and 104% at CER.
Hologic, Inc. Price, Consensus and EPS Surprise
Hologic, Inc. price-consensus-eps-surprise-chart | Hologic, Inc. Quote
U.S. revenues of $1.14 billion rose 79.8%, whereas international revenues of $472 million improved 116.7% year over year or 106% at CER.
Organically, revenues in the United States rose 91.3% year over year to $1.13 billion in the quarter. International revenues were up 157.5% year over year (up 144.7% at CER) to $472 million.
Segments in Detail
Revenues at the Diagnostics segment rose 262.2% year over year (up 256.3% at CER) to $1.13 billion in the quarter under review, with Molecular Diagnostics being the major driver. Molecular Diagnostics’ revenues of $995.3 million climbed 457.6% (up 448.7% at CER), continuing the division’s strong performance. However, Blood Screening revenues of $8.1 million fell 32.5% year over year and at CER.
Revenues at the Breast Health segment improved 0.5% from the year-ago period (down 0.6% at CER) to $332.7 million. This primarily resulted from adverse impacts on demand for this segment’s products due to customers’ focus on responding to the pandemic, delayed or reduced purchases of capital equipment and rescheduled routine screening appointments. However, consumables and service revenues are gradually recovering and the interventional business continued to be aided by the relaunch of the Brevera biopsy system.
Domestic sales in this segment registered an improvement in the quarter, with 0.7% revenue uptick year over year. However, outside the United States, Breast Health sales decreased marginally by 0.1% in total.
Revenues at the GYN Surgical business rose 4.1% year over year (up 3.3% at CER) to $124 million, while revenues at Skeletal Health climbed 6% year over year (up 4% at CER) to $24.9 million.
Notably, Hologic no longer reports for the Medical Aesthetics segment post the divestiture of Cynosure Medical Aesthetics business on Dec 30, 2019.
Operational Update
In fiscal first quarter, the company-reported adjusted gross margin expanded 1,560 basis points to 77.2%. According to the company, the benefits resulted from sales of SARS-CoV-2 tests and the divestiture of the lower-margin Cynosure business.
Adjusted operating expenses amounted to $274.5 million, down 5.1% year over year. However, the company-reported adjusted operating margin expanded 3,270 basis points to 60.2%.
Financial Update
Hologic ended fiscal first-quarter 2021 with cash and investments of $868.7 million, reflecting an improvement from $701 million at fiscal 2020-end. Total long-term debt (including current portion) was $2.76 billion at the end of the first quarter of fiscal 2021 compared with $3.04 billion at the end of fiscal 2020.
Net cash provided by operating activities at the end of first-quarter fiscal 2021 was $650 million, compared with $113.9 million a year ago.
Guidance
Hologic, boosted by the strength in its COVID-19 tests and the ongoing recovery of its other divisions, has provided the financial guidance for second-quarter fiscal 2021.
The company projects revenues within $1.50-$1.56 billion (projection of 98.4-106.3% growth rate). The growth rate is projected in the range of 93.9-101.9% at CER and within 96.2-104.3%, organically. The Zacks Consensus Estimate for second-quarter fiscal 2021 revenues is pegged at $1.35 billion.
GAAP EPS is estimated within $2.34-$2.46, which projects growth of 550-583.3%.
The adjusted EPS is estimated within $2.56-$2.68, with projected growth of 349.1-370.2%. The Zacks Consensus Estimate for second-quarter fiscal 2021 EPS is pegged at $1.94.
Our Take
Hologic exited fiscal first quarter with better-than-expected earnings and in-line revenues. The robust bottom- and top-line growth amid the pandemic-led business disruptions is encouraging. Rise in organic revenues is impressive as well. Growth in Diagnostic revenues, led by a stupendous improvement in the company’s Molecular Diagnostics revenues, buoys optimism. Robust demand for the company’s COVID-19-related products and ongoing recovery in other segments have enabled the company to provide fiscal second-quarter guidance, which instills confidence in investors. Recently announced buyouts of Biotheranostics and SOMATEX Medical Technologies GmbH, along with receipt of a slew of regulatory approvals bode well for the company. Expansion of both margins looks encouraging.
On the flip side, a soft global revenue in the overall Breast Health segment is worrying. Geographically, Latin America lagged behind all other regions in terms of growth in the Breast Health arm, which is concerning.
Zacks Rank and Other Key Picks
Hologic currently carries a Zacks Rank #1 (Strong Buy).
A few other top-ranked stocks in the broader medical space are IDEXX Laboratories, Inc. IDXX, Align Technology, Inc. ALGN and Omnicell, Inc. OMCL.
The Zacks Consensus Estimate for IDEXX’s fourth-quarter 2020 revenues is pegged at $679.3 million, suggesting a year-over-year improvement of 12.2%. The same for EPS stands at $1.43, indicating growth of 37.5% from the year-ago reported figure. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Align Technology’s fourth-quarter 2020 revenues is pegged at $781.9 million, implying 20.3% increase from the year-earlier reported figure. The same for EPS stands at $2.13, indicating growth of 39.2% from the year-ago reported figure. The company currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Omnicell’s fourth-quarter 2020 EPS is currently pegged at 79 cents, indicating growth of 2.6% from the year-ago reported figure. The company currently flaunts a Zacks Rank #1.
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