Why You Should Add Hologic (HOLX) to Your Portfolio Now
Hologic, Inc. HOLX is gaining from the continued strength of the GYN Surgical and Breast Health businesses. The company’s earnings and revenues in the first quarter of fiscal 2023 beat the Zacks Consensus Estimate. However, stiff competition and currency headwinds do not bode well.
In the past year, this Zacks Rank #2 (Buy) stock has gained 6.1% against the 16.9% fall of the industry and the 11.3% fall of the S&P 500.
The renowned medical device company has a market capitalization of $19.89 billion. Its earnings for the first quarter of fiscal 2023 surpassed the Zacks Consensus Estimate by 18.9%. Hologic’s long-term historical growth is estimated at 23.4% compared with the industry’s growth expectation of 4.5%.
Let’s delve deeper.
Factors at Play
Q1 Upsides: Hologic delivered better-than-expected earnings and revenues for the first quarter of fiscal 2023. Excluding COVID-related business, Diagnostics grew 15.8% organically, powered by 24.5% growth in Molecular Diagnostics. Surgical also delivered an impressive quarter, growing 14.7% organically.
While the extra days contributed approximately 250 basis points of net growth, even without the extra days, Diagnostics and Surgical both grew double digits and Breast Health exceeded prior guidance. Hologic is currently well positioned to achieve its full-year guidance of low double-digit organic growth ex-COVID in all three franchises, well above the 5-7% long-term growth rate.
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Strength in Breast Health: Hologic has been making impressive progress in its Breast Health arm recently. The company is currently focusing on expanding its strategy to diversify the business across the patient continuum of care. It has also launched new software products based on its investments in artificial intelligence and has strengthened its interventional franchise via the Brevera relaunch.
Even though supply-chain challenges persist, demand for the company’s best-in-class Breast Health products remained strong during the first quarter of fiscal 2023. The company anticipates the chip supply chain shortage to recover throughout fiscal 2023 and into 2024.
Strength in GYN Surgical: Over the past few years, the GYN Surgical business has transformed into the most profitable division of Hologic on a percentage basis, banking on new leadership, strong strategic execution of new commercial models and new product launches.
Revenues at the GYN Surgical business rose 14.7% year over year organically. These results underscore a more diverse surgical business with more growth drivers than in the past. In addition to strong performance from MyoSure and better-than-expected results from NovaSure, the quarter showcased increasing contributions from Fluent and the company’s laparoscopic portfolio of Asessa and Boulder. Through the Acessa and Bolder acquisitions, the company integrated Acessa’s procedure and Bolder’s advanced vessel sealing portfolio into its product line.
Downsides
Foreign Exchange Headwinds: We remain worried about the significant challenges Hologic faced owing to unfavorable foreign currency impact that adversely affected the company’s overall performance in the past few quarters.
Competitive Landscape: Hologic operates in a highly competitive industry. Its mammography, related products and subsystems compete on a worldwide basis with products offered by several competitors, including General Electric Company, Siemens, Koninklijke Philips NV, or Philips, Planmed Oy, or Planmed, Agfa-Gevaert N.V., or Agfa, Carestream Health, Inc., FUJIFILM Holdings Corporation, or Fuji, I.M.S., and Toshiba Corporation.
Estimate Trend
In the past 90 days, the Zacks Consensus Estimate for Hologic’s fiscal 2023 earnings has moved 8.1% north to $3.74.
The Zacks Consensus Estimate for its fiscal 2023 revenues is pegged at $3.97 billion, suggesting an 18.4% fall from the year-ago reported number.
Other Key Picks
Some other top-ranked stocks in the broader medical space are Henry Schein, Inc. HSIC, Orthofix Medical OFIX, and Avanos Medical, Inc. AVNS.
Henry Schein, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 8.1%. HSIC’s earnings surpassed estimates in three of the trailing four quarters and matched the same in the other, the average beat being 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Henry Schein has lost 12.4% compared with the industry’s 10.9% decline in the past year.
Orthofix Medical, carrying a Zacks Rank #2 at present, has an estimated growth rate of 57.71% for the next year. Orthofix’s earnings surpassed the Zacks Consensus Estimate in three of the the trailing four quarters and missed the same in one, the average surprise being 140.02%.
Orthofix Medical’s shares have decreased 49.5% against the industry’s 16.3% decline in the past year.
Avanos, carrying a Zacks Rank #2 at present, has an estimated growth rate of 1.8% for 2023. AVNS’ earnings surpassed estimates in all the trailing four quarters, the average beat being 11%.
Avanos has lost 13.7% compared with the industry’s 17.5% decline in the past year.
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ORTHOFIX MEDICAL INC. (OFIX) : Free Stock Analysis Report
Hologic, Inc. (HOLX) : Free Stock Analysis Report
Henry Schein, Inc. (HSIC) : Free Stock Analysis Report
AVANOS MEDICAL, INC. (AVNS) : Free Stock Analysis Report
