A month has gone by since the last earnings report for Hologic (HOLX Quick QuoteHOLX - Free Report) . Shares have lost about 5.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Hologic due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Hologic Q1 Earnings Beat Estimates, Margins Down

Hologicreported first-quarter fiscal 2023 adjusted earnings per share of $1.07, down 50.7% year over year. However, the bottom line surpassed the Zacks Consensus Estimate by 18.9%.

The adjustments include charges and benefits related to the amortization of acquired intangible assets, certain asset impairment charges and restructuring and integration/consolidation costs, among others.

The company’s GAAP earnings per share was 75 cents in the quarter compared with the year-ago quarter’s EPS of $1.95, reflecting a 61.5% plunge.

Revenues in Detail

Revenues totaled $1.07 billion in the reported quarter, declining 27% year over year (down 25.1% at the constant exchange rate or CER). The metric surpassed the Zacks Consensus Estimate by 9.5%. Lower sales of COVID-19 assays and supply chain challenges related to semiconductor chips in the Breast Health business dragged the top line down.

Segments in Detail

In the fiscal first quarter, U.S. revenues totaled $823.6 million and declined 18.6%. International revenues amounted to $250.6 million, falling 45.4% year over year or 39.4% at CER.

Revenues in the Diagnostics segment declined 41.2% year over year (down 39.4% at CER) to $559.3 million in the quarter under review. Excluding COVID-19 revenues, Diagnostics revenues grew 12.2% on a reported basis and 15.8% at CER.

Cytology & Perinatal revenues of $126.8 million were up 1.6% at CER. Molecular Diagnostics revenues of $425.2 million declined 46.4% at CER. Blood Screening revenues of $7.3 million fell 14.1% year over year at CER.

Revenues in the Breast Health segment fell 7% from the year-ago period (down 5.2% at CER) to $334.2 million. This primarily resulted from lower capital equipment revenue resulting from semiconductor chip shortages. Further, outside the United States, Breast Health sales declined 27.3% at CER.

Revenues at the GYN Surgical business rose 14.7% year over year (up 17.4% at CER) to $154.1 million, led by improved procedure volume as COVID prevalence declined.

Revenues at Skeletal Health declined 1.8% year over year (up 0.7% at CER) to $26.6 million.

Operational Update

In the fiscal first quarter, the company-provided adjusted gross margin contracted 1830 basis points (bps) to 31.1%. According to the company, the downside in gross margin was primarily due to a year-over-year decline in COVID-19 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 40.1%, contracted 1525 bps.

Financial Update

Hologic ended first-quarter fiscal 2023 with cash and cash equivalents of $2.44 billion compared with $2.34 billion at the end of fourth-quarter fiscal 2022. Total long-term debt (including the current portion) was $2.83 billion at the end of the fiscal first quarter compared with $2.82 at the end of the fiscal fourth quarter.

Net cash provided by operating activities at the end of the fiscal first quarter was $253.4 million compared with $564.2 million a year ago.

Guidance

Hologic issued the guidance for the second quarter and raised fiscal 2023 guidance.

For fiscal 2023, the company projects revenues within $3.85-4.00 billion (up from previous guidance of $3.70-3.90 billion), suggesting a year-over-year decline in the range of 20.8-17.7% on a reported basis, 19.8-16.7% at CER and 19.8-16.7% organically. The Zacks Consensus Estimate for fiscal 2023 revenues is pegged at $3.95 billion.

Adjusted earnings per share for fiscal 2023 are estimated within $3.55-$3.85 (up from thre previous guidance of $3.30-$3.60), with a projected decline of 41-36% year over year. The Zacks Consensus Estimate for fiscal 2023 earnings per share is pegged at $3.49.

For second-quarter fiscal 2023, the company projects revenues within $930-$980 million, suggesting a year-over-year decline in the range of 35.2-31.7% on a reported basis, 34-30.5% at CER and 34-$30.5% organically. The Zacks Consensus Estimate for second-quarter fiscal 2023 revenues is pegged at $934.8 million.

Adjusted earnings per share for the second quarter are estimated within 80-90 cents, suggesting a decline of 61.4-56.5% year over year. The Zacks Consensus Estimate for second-quarter fiscal 2023 earnings per share is pegged at 84 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

At this time, Hologic has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Hologic has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.