Can Molecular Diagnostics Arm Up Hologic (HOLX) Q1 Earnings?

Hologic, Inc. (NASDAQ:HOLX) is slated to report first-quarter fiscal 2018 financial results on Feb 8 after the closing bell. Last quarter, the company delivered a positive earnings surprise of 2.04%. Notably, Hologic’s earnings surpassed the Zacks Consensus Estimate in all the past four quarters with an average beat of 3.69%.

Let’s see, how things are shaping up prior to this announcement.

Key Catalyst

Per the company’s Jan 8 release of its preliminary revenue performance for the first quarter of fiscal 2018, it is expected to report total revenues of $791 million, up 8% year over year and up 7% at constant exchange rate or CER. This preliminary prediction edges past the company’s guided range of $775-$790 million for the to-be-reported quarter. The Zacks Consensus Estimate for the same period is pegged at $785 million, below the company’s preliminary number.

Within Diagnostics, the company expects to report revenues of $285 million, down 12.3% from the year-ago reported figure. The Zacks Consensus Estimate of $274 million remains 15.7% down from the year-ago number.

This year-over-year decline can be attributed to the estimated loss to be incurred from the divested blood screening franchise. Also, the company witnessed a dull sales performance from cytology and perinatal products in the recent past. Despite international growth, the fourth-quarter cytology revenue numbers declined primarily on dismal sales performance in the United States.

However, Hologic is expected to see a stellar performance within Molecular Diagnostics, a major subsegment of Diagnostics. In the United States, the company is expected to gain from an increasing market share and utilization of fully automated Panther system along with market expansion by conforming to the testing guidelines.

Earlier, Hologic stated that it had shipped 1,300 Panthers to diagnostics customers with about 800 in the United States by 2017-end. The company noted that it actually shipped slightly more Panther systems in the period than it did a year ago. This in turn illustrates the company’s sturdy competitive edge in the molecular diagnostics space.

Notably, Hologic has recently received an FDA approval to market the AptimaHerpes Simplex Virus 1 & 2 molecular assay on the Panther system. The company believes that this nod will draw more customers apart from broadening the Panther women health menu.

Last quarter, Molecular Diagnostics results were robust on an internationally, markingthe sixth consecutive quarter of double-digit growth. This upside wascourtesy of benefits of a new leadership, healthy Panther placements and multiple product introductions. These developments should further boost Molecular Diagnostics revenues in the to-be-reported quarter.

The Zacks Consensus Estimate for Molecular Diagnostics revenues of $151 million reflects an increase of 7.9% from the year-ago quarter.

Here are a few other factors that might influence Hologic’s fourth-quarter results:

Hologic is hopeful of sustaining a solid earnings trend in 2018 on the back of gains from the GYN Surgical segment. Strong global sales of MyoSure have been driving the top line at this segment. Given the huge market potential of MyoSure, we expect the company to maintain a bullish trend. In this regard, we must note that the U.S. launch of MyoSure MANUAL device has helped widening the company’s gynecologic solutionsportfolio.

The Zacks Consensus Estimate of $115 million for GYN Surgical revenues for the first quarter fiscal 2018 remains in line with the prior-year tally. Also, the Zacks Consensus Estimate for MyoSure revenues of $53 million represents a rise of 9.7% from the year-ago period.

For first-quarter, adjusted EPS is projected at 48-50 cents, reflecting an annualized decline of (3.8)-(7.7)%. The Zacks Consensus Estimate for the metric in the same period is pegged at 49 cents, within the guided range.

On the flip side, Hologic had faced challenges related to an unfavorable foreign currency movement over the past few quarters. Escalating operating expenses and intense competition, particularly in the tomosynthesis market, continue to raise a concern.

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What Our Quantitative Model Predicts:

Our proven model does not conclusively show that Hologic is likely to beat estimates this quarter. This is because a stock needs to have both a positive Zacks Investment Research

Written By: Zacks Investment Research