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Hologic's (HOLX) Q1 Earnings Beat Estimates, Guidance Raised

Zacks Equity Research

Hologic, Inc. HOLX reported first-quarter fiscal 2019 adjusted earnings per share (EPS) of 58 cents, up 5.5% year over year. The bottom line surpassed the Zacks Consensus Estimate by a penny and is above the company’s guided range of 55-57 cents.

On a reported basis, the company recorded net income of 36 cents per share compared with $1.45 a year ago.

Revenues in Detail

Revenues grossed $830.7 million in the reported quarter, up 5% year over year (up 5.7% at constant exchange rate or CER). The top line surpassed the Zacks Consensus Estimate of $818.4 million as well as the company’s projection of $800-$815 million.

Hologic, Inc. Price, Consensus and EPS Surprise

Hologic, Inc. Price, Consensus and EPS Surprise | Hologic, Inc. Quote

Geographically, revenues in the United States rose 4.1% year over year to $621.8 million in the quarter. International revenues were up 7.7% (up 10.7% at CER) to $208.9 million, primarily on strong contribution from the Molecular Diagnostics, Breast Health and Surgical businesses.

Segments in Detail

Revenues at the Diagnostics segment (representing 35.7% of total revenues) rose 4.2% year over year (up 5% at CER) to $296.6 million in the quarter under review. Under this segment, Molecular Diagnostics revenues of $164.3 million rose 10.6% (up 11.2% at CER) fueled by strong international performance. However, Cytology and Perinatal revenues of $118.1 million showed a 4.3% drop (down 3.2% at CER).

Revenues at the Breast Health segment (39.1%) increased 12.7% (up 13.4% at CER) to $324.7 million. This metric in the United States grew 12.6%. Internationally, Breast Health revenues grew 13.3% (up 16.1% at CER).

Revenues at the GYN Surgical business (13.1%) grew 0.8% (up 1.4% at CER) to $108.4 million. Medical Aesthetic business in the reported quarter logged revenues of $79.8 million, reflecting a 12.6% decline (down 11.6% at CER).

Revenues at Skeletal Health (accounting for the rest) increased 7.6% (up 8.5% at CER) to $21.2 million.

Operational Update

In the fiscal first quarter, Hologic’s adjusted gross margin contracted 170 basis points (bps) to 62%. This downside was primarily due to an adverse geographic and product sales mix.

Hologic’s adjusted operating expenses amounted to $277.8 million, up 2.1% year over year. Adjusted operating margin contracted 70 bps to 28.6%.

Financial Update

Hologic exited the first quarter of fiscal 2019 with cash and cash equivalents of $311.1 million compared with $666.7 million at the end of fiscal 2018. Total long-term debt was $3.13 billion in the reported quarter compared with $3.30 billion at the end of fiscal 2018.

For the three months ending Dec 29, 2018, the company generated operating cash flow of $104.6 million compared with $169.1 million a year ago.

Guidance Updated

Hologic has updated its fiscal 2019 financial guidance. The company now expects adjusted revenues in the range of $3,305-$3,335 million compared with $3,290-$3,335 million stated previously (expected growth rate of 3.8-4.7% from 2.8-4.2% at CER). The Zacks Consensus Estimate for revenues is pegged at $3.32 billion, within the guided range.

The company envisions adjusted EPS of $2.39-$2.43 compared with $2.38-$2.42, stated previously (a projection of 7.2-9.0% from 6.7-8.5% growth rate). The consensus mark for the metric is pegged at $2.40, within the estimated range.

For second-quarter fiscal 2019, Hologic anticipates adjusted revenues of $795-$810 million, indicating 2.5-4.4% expected growth at CER. The consensus estimate for revenues is $811 million, above the projected range.

Adjusted EPS is predicted at 55-57 cents, reflecting annualized growth of 3.8-7.5%. The Zacks Consensus Estimate for fiscal second-quarter adjusted EPS is pegged at 58 cents, higher than the company’s forecast.

Our Take

Hologic exited the first quarter of fiscal 2019 on a solid note led by double-digit constant currency growth in the core businesses like U.S. Breast Health, International and Global Molecular Diagnostics. We are also upbeat about the recent product launches like the Omni hysteroscope and Panther Fusion Open Access functionality in the United States, the Panther Fusion Bordetella assay in Europe, and the Surgical hand piece for the TempSure radiofrequency system in North America.

Zacks Rank & Key Picks

Hologic carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader medical space are Varian Medical Systems VAR, AngioDynamics ANGO and CONMED Corporation CNMD.

AngioDynamics’ fiscal second-quarter adjusted earnings of 22 cents per share beat the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, surpassing the consensus estimate by 2.9%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here .

Varian’s fiscal first-quarter adjusted earnings of $1.06 per share were in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock has a Zacks Rank #2 (Buy).

CONMED’s fourth-quarter adjusted earnings per share of 73 cents met the Zacks Consensus Estimate. Revenues of $242.4 million surpassed the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank #2.

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