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Pre Q3 Earnings: Is Hologic (HOLX) Stock a Portfolio Must-Have?
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Hologic (HOLX - Free Report) is set to release fiscal 2024 third-quarter 2024 results on Jul 29 after the closing bell. The performance is expected to reflect the strength of the company’s core franchises, overcoming the challenging comps of fiscal 2023.
The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings suggests 9.7% growth to $1.02 per share. The estimate has remained constant in the past 60 days. Meanwhile, the Zacks Consensus Estimate for its revenues indicates a 1.7% improvement to $1 billion.
Image Source: Zacks Investment Research
Earnings Surprise History
The women’s health-focused diagnostics company surpassed the consensus earnings estimate in each of the trailing four quarters, with the average surprise being 4.94%.
Image Source: Zacks Investment Research
Factors Shaping Q3 Results
We expect the company’s broad menu of molecular diagnostics tests, excluding the COVID-19 assays, to significantly drive top-line performance in the fiscal third quarter. In the United States, the ongoing adoption of BV and CV/TV tests on the Panther, the success of the respiratory suite of assays on the Fusion system and the strong performance of the Biotheranostics CLIA laboratory are likely to have favored the business growth. Our model estimates 6.4% year-over-year growth in Molecular Diagnostics revenues for the fiscal third quarter.
Within Cytology & Perinatal, the Genius AI Digital Diagnostics system may have boosted international performance. Featuring a combination of advanced imaging and deep-learning-based AI, the new cervical cancer screening system became the first FDA-cleared digital cytology system in February this year. Internationally, the business is expected to contribute to worldwide diagnostics growth.
However, we note that Hologic had higher-than-usual sales in the third quarter of fiscal 2023, led by third-party shipping difficulties earlier in the year. As a result, the company may have found it challenging to achieve those figures this time around.
Moving on to Hologic’s Breast Health franchise, we assume a strong performance from the gantry and service businesses in the quarter under review. Backed by robust visibility into orders, the company is expected to place more gantries worldwide, potentially moving toward surpassing last year’s placements. In addition, the emerging interventional breast business outside the United States may have favorably impacted the segment's overall growth. Our model estimates a 3.4% year-over-year improvement in Breast Health revenues in the third quarter of fiscal 2024.
The GYN Surgical arm may have benefitted from the robust sales volume of MyoSure devices and Fluent Fluid Management products. In the second quarter, the international business led the worldwide Surgical growth against a high prior-year comparison, highlighting the effectiveness of ongoing market penetration and the go-direct strategy in the Nordics. The momentum is also likely to have continued in the fiscal third quarter. Our model estimate for the segment’s revenues implies a year-over-year increase of 7.1% in the to-be-reported quarter.
Shifting to expenses and margins, Hologic may have delivered an impressive gross margin performance in the third quarter of fiscal 2024 by amortizing off the higher-priced semiconductor chips purchased earlier. We also expect a 6.9% reduction in non-GAAP operating expenses, leading to a 7.3% improvement in the non-GAAP operating profit compared to a similar period in 2023.
Amid all these positives, Hologic’s overall growth in the fiscal third quarter may have been impacted by the persistent decline in COVID-19 testing demand. A reduction in the system placements and upgrades is expected to hurt the Skeletal Health segment’s growth. Furthermore, global macroeconomic issues and a stronger U.S. dollar are likely to have been headwinds for the company in the to-be-reported quarter.
Price Performance
Year to date, HOLX shares have jumped 9.8%, outperforming the industry’s 4.3% growth. Meanwhile, peers such as QIAGEN (QGEN - Free Report) and Abbott Laboratories, Inc. (ABT - Free Report) have experienced 4.9% and 6.7% respective drops in their share value in the same time frame.
YTD Price Comparison
Image Source: Zacks Investment Research
Discounted Valuation
In terms of P/E valuation, HOLX stock is currently trading at 17.99X forward 12 months earnings, which is much discounted compared to the industry’s 32.42X.
Price-to-Earnings Forward Twelve Months (F12M)
Image Source: Zacks Investment Research
The stock also appears cheaper in comparison to QGEN and ABT, which are trading at 19.36X and 21.02X, respectively.
Investment Thesis
Hologic’s future growth prospects are highlighted by its impressive portfolio of products regardless of macroeconomic hurdles. In the Molecular Diagnostics business, the company has expanded both the worldwide Panther footprint and menu, with the BV and CV/TV assays and the Biotheranostics business making strong contributions.
Key GYN Surgical products like Myosure, Fluent and NovaSure are leading the way, with the laparoscopic portfolio becoming a more significant driver for the division. The Breast Health segment, which delivered three consecutive quarters of above 25% growth in fiscal 2023, is set to be boosted by the impending Endomagnetics Ltd deal for $310 million.
Such are driven by Hologic’s financial strength, which also supports regular share repurchases and tuck-in opportunities. Growth-focused investments are already yielding increased brand awareness, market share gains and price stability. Furthermore, the company’s strong international performance and commitment to advancing women’s health options signal promising growth opportunities ahead. With robust operational flexibility, Hologic looks set to elevate the top and bottom-line performance.
Conclusion
Being a prominent player in women’s health, Hologic continues to leverage the diversity of its core businesses and multiple growth drivers to drive its success. Presently holding a Zacks Rank #2 (Buy), the company’s robust financial flexibility funds acquisitions and share buybacks, while its focus on international expansion positions it well for longer-term growth. You can see the complete list of today’s Zacks #1 Rank stocks here.
Moreover, a consistent track record of exceeding earnings forecasts, strong market shares and favorable valuation make Hologic a compelling investment choice. We expect the company’s upcoming earnings report to confirm this view.
Image: Bigstock
Pre Q3 Earnings: Is Hologic (HOLX) Stock a Portfolio Must-Have?
Hologic (HOLX - Free Report) is set to release fiscal 2024 third-quarter 2024 results on Jul 29 after the closing bell. The performance is expected to reflect the strength of the company’s core franchises, overcoming the challenging comps of fiscal 2023.
The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings suggests 9.7% growth to $1.02 per share. The estimate has remained constant in the past 60 days. Meanwhile, the Zacks Consensus Estimate for its revenues indicates a 1.7% improvement to $1 billion.
Image Source: Zacks Investment Research
Earnings Surprise History
The women’s health-focused diagnostics company surpassed the consensus earnings estimate in each of the trailing four quarters, with the average surprise being 4.94%.
Image Source: Zacks Investment Research
Factors Shaping Q3 Results
We expect the company’s broad menu of molecular diagnostics tests, excluding the COVID-19 assays, to significantly drive top-line performance in the fiscal third quarter. In the United States, the ongoing adoption of BV and CV/TV tests on the Panther, the success of the respiratory suite of assays on the Fusion system and the strong performance of the Biotheranostics CLIA laboratory are likely to have favored the business growth. Our model estimates 6.4% year-over-year growth in Molecular Diagnostics revenues for the fiscal third quarter.
Within Cytology & Perinatal, the Genius AI Digital Diagnostics system may have boosted international performance. Featuring a combination of advanced imaging and deep-learning-based AI, the new cervical cancer screening system became the first FDA-cleared digital cytology system in February this year. Internationally, the business is expected to contribute to worldwide diagnostics growth.
However, we note that Hologic had higher-than-usual sales in the third quarter of fiscal 2023, led by third-party shipping difficulties earlier in the year. As a result, the company may have found it challenging to achieve those figures this time around.
Moving on to Hologic’s Breast Health franchise, we assume a strong performance from the gantry and service businesses in the quarter under review. Backed by robust visibility into orders, the company is expected to place more gantries worldwide, potentially moving toward surpassing last year’s placements. In addition, the emerging interventional breast business outside the United States may have favorably impacted the segment's overall growth. Our model estimates a 3.4% year-over-year improvement in Breast Health revenues in the third quarter of fiscal 2024.
The GYN Surgical arm may have benefitted from the robust sales volume of MyoSure devices and Fluent Fluid Management products. In the second quarter, the international business led the worldwide Surgical growth against a high prior-year comparison, highlighting the effectiveness of ongoing market penetration and the go-direct strategy in the Nordics. The momentum is also likely to have continued in the fiscal third quarter. Our model estimate for the segment’s revenues implies a year-over-year increase of 7.1% in the to-be-reported quarter.
Shifting to expenses and margins, Hologic may have delivered an impressive gross margin performance in the third quarter of fiscal 2024 by amortizing off the higher-priced semiconductor chips purchased earlier. We also expect a 6.9% reduction in non-GAAP operating expenses, leading to a 7.3% improvement in the non-GAAP operating profit compared to a similar period in 2023.
Amid all these positives, Hologic’s overall growth in the fiscal third quarter may have been impacted by the persistent decline in COVID-19 testing demand. A reduction in the system placements and upgrades is expected to hurt the Skeletal Health segment’s growth. Furthermore, global macroeconomic issues and a stronger U.S. dollar are likely to have been headwinds for the company in the to-be-reported quarter.
Price Performance
Year to date, HOLX shares have jumped 9.8%, outperforming the industry’s 4.3% growth. Meanwhile, peers such as QIAGEN (QGEN - Free Report) and Abbott Laboratories, Inc. (ABT - Free Report) have experienced 4.9% and 6.7% respective drops in their share value in the same time frame.
YTD Price Comparison
Image Source: Zacks Investment Research
Discounted Valuation
In terms of P/E valuation, HOLX stock is currently trading at 17.99X forward 12 months earnings, which is much discounted compared to the industry’s 32.42X.
Price-to-Earnings Forward Twelve Months (F12M)
Image Source: Zacks Investment Research
The stock also appears cheaper in comparison to QGEN and ABT, which are trading at 19.36X and 21.02X, respectively.
Investment Thesis
Hologic’s future growth prospects are highlighted by its impressive portfolio of products regardless of macroeconomic hurdles. In the Molecular Diagnostics business, the company has expanded both the worldwide Panther footprint and menu, with the BV and CV/TV assays and the Biotheranostics business making strong contributions.
Key GYN Surgical products like Myosure, Fluent and NovaSure are leading the way, with the laparoscopic portfolio becoming a more significant driver for the division. The Breast Health segment, which delivered three consecutive quarters of above 25% growth in fiscal 2023, is set to be boosted by the impending Endomagnetics Ltd deal for $310 million.
Such are driven by Hologic’s financial strength, which also supports regular share repurchases and tuck-in opportunities. Growth-focused investments are already yielding increased brand awareness, market share gains and price stability. Furthermore, the company’s strong international performance and commitment to advancing women’s health options signal promising growth opportunities ahead. With robust operational flexibility, Hologic looks set to elevate the top and bottom-line performance.
Conclusion
Being a prominent player in women’s health, Hologic continues to leverage the diversity of its core businesses and multiple growth drivers to drive its success. Presently holding a Zacks Rank #2 (Buy), the company’s robust financial flexibility funds acquisitions and share buybacks, while its focus on international expansion positions it well for longer-term growth. You can see the complete list of today’s Zacks #1 Rank stocks here.
Moreover, a consistent track record of exceeding earnings forecasts, strong market shares and favorable valuation make Hologic a compelling investment choice. We expect the company’s upcoming earnings report to confirm this view.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.