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Hologic’s (HOLX - Free Report) progress in the domestic and international markets, a strong pipeline of products and continued solid performance of the Molecular Diagnostics segment bolster confidence. Yet, supply-chain hurdles, chip shortage issues and severe FX impact deter growth. The stock currently carries a Zacks Rank #3 (Hold).
Over the past year, Hologic has outperformed its industry. The stock has lost 1.8% compared with the industry’s 24.4% decline.
Hologic delivered better-than-expected earnings for the fourth quarter of fiscal 2022. Both the company’s molecular diagnostics and surgical businesses grew strong in the quarter.
Hologic’s global molecular diagnostics franchise grew 17% at CER, excluding revenues from COVID tests. This upside reflected the high utilization of the company’s expanded Panther installed base. The uptick in the molecular diagnostics business was broad-based and fueled by a combination of legacy and newer assays in the portfolio.
The legacy STI business contributed growth in dollars while the newer assays, including the vaginitis panel, Amgen and the company’s virology portfolio lifted the growth rate. As for Panther placements, at the end of the fiscal fourth quarter, the company had nearly 3,250 Panthers placed globally. This favorably compares to the pre-COVID level as the company exited fiscal 2019 with about 1,700 Panthers in the field.
Revenues at the GYN Surgical business rose 9% year over year organically and over 11%, including the Bolder acquisition. As anticipated, the COVID pressure on surgical business abated in the quarter, and the company registered procedural volumes return as well as acceleration from its new business lines. The major growth drivers of fiscal Q4 were MyoSure Fluent as well as Bolder and Acessa.
Hologic currently expects the Surgical arm to deliver low double-digit growth in fiscal 2023. Similar to the last two quarters of fiscal 2022, the company believes MyoSure and Fluent along with Acessa and Bolder to continue to act as major contributors.
On the flip side, in the fourth quarter of fiscal 2022, Hologic witnessed a decline in reported revenues compared to the year-ago fiscal period. The decline in the top line can be attributed to lower COVID assay sales and supply-chain challenges in the Breast Health business. Revenues in the Breast Health segment fell on a year-over-year basis due to the persistent shortage of semiconductor chips.
Escalating operating costs and the contraction of both margins are worrying. In the fiscal fourth quarter, the company-provided adjusted gross margin contracted 690 basis points (bps) to 62.5%.
According to the company, the decrease in the gross margin was primarily due to a year-over-year decline in COVID assay sales and lower capital equipment sales due to supply-chain challenges related to semiconductor chip shortages, which impacted its Breast Health business. The company’s adjusted operating margin was 27.9%, down 1460 bps.
We also remain worried about the significant challenges Hologic faces owing to unfavorable foreign currency impact that has been affecting the company’s overall performance in the past few quarters.
Key Picks
A few better-ranked stocks in the broader medical space are ShockWave Medical, Inc. , Orthofix Medical Inc. (OFIX - Free Report) and Merit Medical System (MMSI - Free Report) .
ShockWave Medical, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
Merit Medical, currently carrying a Zacks Rank of 2, reported third-quarter 2022 adjusted EPS of 64 cents, which beat the Zacks Consensus Estimate by 20.8%. Revenues of $287.2 million outpaced the consensus mark by 5.2%.
Merit Medical has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average being 25.4%.
Orthofix Medical currently sporting a Zacks Rank of 1, reported third-quarter 2022 adjusted EPS of 13 cents, which beat the Zacks Consensus Estimate by a stupendous 550%. Revenues of $114 million outpaced the consensus mark by 2.7%.
Orthofix Medical has an estimated next-year growth rate of 58.97%. OFIX’s earnings surpassed estimates in the trailing three quarters and missed in one, the average being 129.1%.
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Hologic's (HOLX) Panther Utilization Rises, Supply Issue Ails
Hologic’s (HOLX - Free Report) progress in the domestic and international markets, a strong pipeline of products and continued solid performance of the Molecular Diagnostics segment bolster confidence. Yet, supply-chain hurdles, chip shortage issues and severe FX impact deter growth. The stock currently carries a Zacks Rank #3 (Hold).
Over the past year, Hologic has outperformed its industry. The stock has lost 1.8% compared with the industry’s 24.4% decline.
Hologic delivered better-than-expected earnings for the fourth quarter of fiscal 2022. Both the company’s molecular diagnostics and surgical businesses grew strong in the quarter.
Hologic’s global molecular diagnostics franchise grew 17% at CER, excluding revenues from COVID tests. This upside reflected the high utilization of the company’s expanded Panther installed base. The uptick in the molecular diagnostics business was broad-based and fueled by a combination of legacy and newer assays in the portfolio.
Hologic, Inc. Price
Hologic, Inc. price | Hologic, Inc. Quote
The legacy STI business contributed growth in dollars while the newer assays, including the vaginitis panel, Amgen and the company’s virology portfolio lifted the growth rate. As for Panther placements, at the end of the fiscal fourth quarter, the company had nearly 3,250 Panthers placed globally. This favorably compares to the pre-COVID level as the company exited fiscal 2019 with about 1,700 Panthers in the field.
Revenues at the GYN Surgical business rose 9% year over year organically and over 11%, including the Bolder acquisition. As anticipated, the COVID pressure on surgical business abated in the quarter, and the company registered procedural volumes return as well as acceleration from its new business lines. The major growth drivers of fiscal Q4 were MyoSure Fluent as well as Bolder and Acessa.
Hologic currently expects the Surgical arm to deliver low double-digit growth in fiscal 2023. Similar to the last two quarters of fiscal 2022, the company believes MyoSure and Fluent along with Acessa and Bolder to continue to act as major contributors.
On the flip side, in the fourth quarter of fiscal 2022, Hologic witnessed a decline in reported revenues compared to the year-ago fiscal period. The decline in the top line can be attributed to lower COVID assay sales and supply-chain challenges in the Breast Health business. Revenues in the Breast Health segment fell on a year-over-year basis due to the persistent shortage of semiconductor chips.
Escalating operating costs and the contraction of both margins are worrying. In the fiscal fourth quarter, the company-provided adjusted gross margin contracted 690 basis points (bps) to 62.5%.
According to the company, the decrease in the gross margin was primarily due to a year-over-year decline in COVID assay sales and lower capital equipment sales due to supply-chain challenges related to semiconductor chip shortages, which impacted its Breast Health business. The company’s adjusted operating margin was 27.9%, down 1460 bps.
We also remain worried about the significant challenges Hologic faces owing to unfavorable foreign currency impact that has been affecting the company’s overall performance in the past few quarters.
Key Picks
A few better-ranked stocks in the broader medical space are ShockWave Medical, Inc. , Orthofix Medical Inc. (OFIX - Free Report) and Merit Medical System (MMSI - Free Report) .
ShockWave Medical, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 35% against the industry’s 32.6% fall in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Merit Medical, currently carrying a Zacks Rank of 2, reported third-quarter 2022 adjusted EPS of 64 cents, which beat the Zacks Consensus Estimate by 20.8%. Revenues of $287.2 million outpaced the consensus mark by 5.2%.
Merit Medical has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average being 25.4%.
Orthofix Medical currently sporting a Zacks Rank of 1, reported third-quarter 2022 adjusted EPS of 13 cents, which beat the Zacks Consensus Estimate by a stupendous 550%. Revenues of $114 million outpaced the consensus mark by 2.7%.
Orthofix Medical has an estimated next-year growth rate of 58.97%. OFIX’s earnings surpassed estimates in the trailing three quarters and missed in one, the average being 129.1%.