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Hologic's (HOLX) Q4 Earnings Meet, Revenues Top Estimates

Zacks Equity Research

Hologic, Inc. HOLX reported fourth-quarter fiscal 2019 adjusted earnings per share (EPS) of 65 cents, up 12.1% year over year. The reported figure was in line with the Zacks Consensus Estimate.

On a GAAP basis, the company’s earnings of 15 cents per share reflect a 16.7% drop from the year-ago quarter.

For fiscal 2019, adjusted EPS came in at $2.43, up 8.9% from the year-ago figure. However, the metric missed the consensus mark by a penny.

Revenues in Detail

Revenues grossed $865.8 million in the reported quarter, up 6.4% year over year (up 7.3% at constant exchange rate or CER). The metric beat the Zacks Consensus Estimate of $843.30 million, by 2.7%.

Hologic, Inc. Price, Consensus and EPS Surprise


Hologic, Inc. Price, Consensus and EPS Surprise

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

For fiscal 2019, total revenues were $3.37 billion, up 4.6% from the year-ago tally. Moreover, the figure surpassed the Zacks Consensus Estimate by 0.6%.

Excluding the divested Blood Screening business, total revenues in the fourth quarter came in at $849.1 million, up 6.1%year over year and 6.9% at CER.

Geographically, revenues in the United States rose 6.7% year over year to $656.2 million in the quarter. International revenues were up 5.7% (up 9.2% at CER) to $209.6 million as well, primarily on strong contributions from the Breast Health, Molecular Diagnostics and GYN Surgical businesses.

Segments in Detail

Revenues at the Diagnostics segment (excluding the divested Blood Screening business) rose 5.1% year over year (up 6.1% at CER) to $290.1 million in the quarter under review with Molecular Diagnostics being a major driver. Molecular Diagnostics revenues of $172.1 million climbed 8.9% (up 9.8% at CER), marking the fourth consecutive quarter of double-digit constant currency growth despite a challenging prior-year comparison.

However, Cytology and Perinatal revenues of $118 million were flat year over year (up 1% at CER).

Revenues at the Breast Health segment increased 6.3% (up 7.1% at CER) to $342.6 million. Domestic sales drove Breast Health growth in the quarter with 6.4% revenue rise year over year, whereas outside the United States, Breast Health sales climbed 9.4% (at CER), primarily on the company’s focus on rising product sales.

Revenues at the GYN Surgical business grew 6.6% (up 7.3% at CER) to $114.5 million, whereas Medical Aesthetic business revenues of $76.9 million reflect an 8.9% uptick (up 10.3% at CER) in the reported quarter.

Revenues at Skeletal Health grew 2.6% (up 3.7% at CER) to $ 25 million.

Operational Update

In the fiscal fourth quarter, Hologic’s adjusted gross margin contracted 19 basis points (bps) to 61.5% primarily due to higher manufacturing costs, an adverse product sales mix, trade tariffs in China and stronger U.S. dollar.

The company witnessed a 6.2% and 14.6% hike in selling and marketing, and research and development expenses, respectively, ($141.8 million and $60.4 million). However, general and administrative expenses contracted 29.1% to $83.7 million.

Adjusted operating expenses amounted to $286 million, down 6% year over year. Also, adjusted operating margin expanded 419 bps to 28.4%.

Financial Update

Hologic exited fiscal 2019 with cash and cash equivalents of $601.8 million compared with $666.7 million at the end of fiscal 2018. Total long-term debt was $2.78 billion in the reported quarter, compared with $2.70 billion at the end of the year-ago quarter.

Full-year net cash provided by operating activities was $649.5 million compared with $732.9 million a year ago.

Guidance Issued

Hologic has issued first quarter and fiscal 2020 guidance. The company expects adjusted revenues for fiscal 2020 in the range of $3.45-$3.50 billion (a projection of 3-4.5% growth at CER). The Zacks Consensus Estimate for revenues stands at $3.48 billion, which lies within the guided range.

The company envisions adjusted EPS of $ 2.60-$2.65 for fiscal 2020. The consensus mark for the metric is pinned at $2.64, which is within and close to the high-end of the estimated range.

For first-quarter fiscal 2020, Hologic anticipates adjusted revenues of $835-$850 million, indicating 1.2-3% growth at CER. The consensus estimate for revenues stands at $ 857.9 million, above the projected range.

Adjusted EPS is estimated at 59-61 cents for first-quarter fiscal 2020. The Zacks Consensus Estimate for the same is pegged at 64 cents, above the company’s expected range.

Our Take

Hologic exited the fourth quarter of fiscal 2019 on a solid note. Strong top-line growth was led by a year-over-year rise in core businesses like Breast Health, Molecular Diagnostics and GYN Surgical segments. We are also upbeat about the recent launches like Omni Lok cervical seal, and Definity cervical dilator along with the impressive revenue contributions from the recently launched TempSure Affirm and StimSure in Europe.

Meanwhile, the contraction in the gross margin is concerning.

Zacks Rank & Key Picks

Currently, Hologic carries a Zacks Rank #3 (Hold).

A few better-ranked medical device companies, which posted solid results this earnings season, are ResMed Inc RMD, NuVasive, Inc NUVA and Thermo Fisher Scientific Inc TMO.

ResMed, with a Zacks Rank #2 (Buy), reported first-quarter fiscal 2020 adjusted EPS of 93 cents, surpassing the Zacks Consensus Estimate by 6.9%. Its revenues of $681.1 million outpaced the consensus mark by 3.7%.

NuVasive’s third-quarter 2019 adjusted EPS of 59 cents surpassed the Zacks Consensus Estimate by 9.3%. Its revenues totaled $290.8 million, which surpassed the consensus estimate by 2.4%. The stock currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher, with a Zacks Rank #2, delivered third-quarter 2019 adjusted EPS of $2.94, beating the Zacks Consensus Estimate by 2.1%. Its revenues of $6.27 billion beat the Zacks Consensus Estimate by 1.3%.

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