Hologic (HOLX) Beats Q2 Earnings Estimates, Withdraws View

Hologic (HOLX) exhibits robust segmental growth in second-quarter fiscal 2020, fueled by strong performance by the Diagnostics segment amid the coronavirus pandemic. Read More...

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Hologic, Inc. HOLX reported second-quarter fiscal 2020 adjusted earnings per share (EPS) of 57 cents, down 1.7% year over year. The bottom line however surpassed the Zacks Consensus Estimate by 5.6%.

On a GAAP basis, the company’s earnings of 36 cents per share reflect an improvement from the year-ago quarter’s loss of $1.01 per share.

Revenues in Detail

Revenues grossed $756.1 million in the reported quarter, down 7.6% year over year (down 7.1% at constant exchange rate or CER) due to the divestiture of Cynosure. The metric was in line with the Zacks Consensus Estimate.

Excluding the divested Blood Screening and Medical Aesthetics businesses, total revenues were $740.9 million, up 1.3% year over year and 1.9% at CER. Organic revenues (excluding divestitures and the acquired SuperSonic Imagine or SSI business) of $735.1 million increased 0.5% and 1.1% at CER.” data-reactid=”12″>Hologic, Inc. HOLX reported second-quarter fiscal 2020 adjusted earnings per share (EPS) of 57 cents, down 1.7% year over year. The bottom line however surpassed the Zacks Consensus Estimate by 5.6%.

On a GAAP basis, the company’s earnings of 36 cents per share reflect an improvement from the year-ago quarter’s loss of $1.01 per share.

Revenues in Detail

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Hologic, Inc. Price, Consensus and EPS Surprise” data-reactid=”13″>Hologic, Inc. Price, Consensus and EPS Surprise

Hologic, Inc. price-consensus-eps-surprise-chart | Hologic, Inc. Quote

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="
U.S. revenues of $574.9 million fell 6.6%. Additionally, international revenues of $181.2 million declined 10.7% or 8.6% at CER.” data-reactid=”27″>
U.S. revenues of $574.9 million fell 6.6%. Additionally, international revenues of $181.2 million declined 10.7% or 8.6% at CER.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Organically, revenues in the United States fell 1% year over year to $558.5 million in the quarter. However, international revenues were up 6% (up 8.4% at CER) to $176.6 million.

Segments in Detail

Revenues at the Diagnostics segment rose 7.6% year over year (up 8.3% at CER) to $319.2 million in the quarter under review, with Molecular Diagnostics being the major driver. Molecular Diagnostics’ revenues of $190.6 million climbed 13.6% (up 14.2% at CER), continuing the division’s strong performance. Moreover, Blood Screening revenues of $15.2 million rose 13.5% (up 13.5% at CER).

Revenues at the Breast Health segment declined 4.3% (down 3.7% at CER) to $307.8 million. This is in line with the company’s preliminary results released earlier this month, where it had stated that weaker-than-expected sales of Breast Health products due to changing customer responses amid the COVID-19 outbreak would impact the segment’s revenues. Domestic sales were dismal in this segment in the quarter, with a 7.3% revenue decline year over year. However, outside the United States, Breast Health sales increased 7.2% in total and grew 0.6% (without SSI).

Revenues at the GYN Surgical business grew 3.1% (up 3.6% at CER) to $105.4 million, while revenues at Skeletal Health fell 2.1% (down 1.6% at CER) to $23.7 million.

Notably, the Medical Aesthetics segment no longer reports after the divestiture of Cynosure medical aesthetics business on Dec 30, 2019.

Operational Update

In the fiscal second quarter, Hologic’s adjusted gross margin remained flat year over year. According to the company, the benefits from the Cynosure Medical Aesthetics divestiture were offset by lower sales due to the pandemic, unfavorable product sales mix and a strong U.S. dollar.

Adjusted operating expenses amounted to $222.5 million, down 18.4% year over year. However, adjusted operating margin expanded 380 basis points to 31.5%.

Financial Update

Hologic exited the second quarter of fiscal 2020 with cash and cash equivalents of $799.8 million compared with $370.8 million at the end of first-quarter fiscal 2020. Total long-term debt was $3.56 billion at the end of the quarter under review, compared with $3.07 billion at the end of first-quarter fiscal 2020. The company completed the $205 million Accelerated Share Repurchase agreement announced in the first quarter and repurchased an additional 5.9 million shares of stock for $267.6 million before suspending its buy-back activities in March.

At the end of the fiscal second quarter, net cash provided by operating activities was $231.6 million compared with $238.1 million a year ago.

Guidance

Hologic expects significant adverse impact of the coronavirus pandemic on its revenues and operating income going forward. The company is currently unable to ascertain the scope and duration of the pandemic as well as quantify the actual impact. Accordingly, it has withdrawn its financial guidance for the second quarter and full-year 2020.

Our Take

Hologic’s top-line growth was led by a year-over-year rise in core GYN Surgical and Molecular Diagnostics sales. Earlier, the company had stated that its sales of GYN Surgical and Diagnostics products were adversely impacted by the deferral of elective procedures and physician office visits due to the coronavirus pandemic. Despite these adversities, these two segments registered growth in the quarter under review.

We are upbeat about the solid uptick in the company’s Diagnostics business resulting from robust sales of Panther Fusion SARS-CoV-2 assay after it received Emergency Use Authorization from the FDA. The company’s efforts to combat the pandemic by means of launch of assays on its Panther instrument and Panther Fusion platform buoy optimism.

On the flip side, the fall in its Breast Health revenues due to the pandemic is worrying.

Zacks Rank and Stocks to Consider

Hologic currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space are Aphria Inc. APHA, Biogen Inc. BIIB and Eli Lilly and Company LLY.

Aphria reported third-quarter fiscal 2020 adjusted EPS of 2 cents, comparing favourably with the Zacks Consensus Estimate of a loss of 4 cents. Its net revenues of $64.4 million outpaced the consensus estimate by 14.6%. The company carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Biogen currently carries a Zacks Rank #2. It reported first-quarter 2020 adjusted EPS of $9.14, surpassing the Zacks Consensus Estimate by 18.1%. Its revenues of $3.53 billion outpaced the consensus mark by 3.2%.

Eli Lilly delivered first-quarter 2020 EPS of $1.75, outpacing the Zacks Consensus Estimate by 12.9%. Its first-quarter revenues of $145.3 million surpassed the consensus estimate by 6.3%. The company currently sports a Zacks Rank #1.

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See their latest picks free >>” data-reactid=”28″>Organically, revenues in the United States fell 1% year over year to $558.5 million in the quarter. However, international revenues were up 6% (up 8.4% at CER) to $176.6 million.