Hologic (HOLX) Q1 Earnings Meet, Revenues Beat Estimates

Hologic, Inc. (NASDAQ:HOLX) reported first-quarter fiscal 2020 adjusted earnings per share (EPS) of 61 cents, up 5.2% year over year. The bottom line was in line with the Zacks Consensus Estimate.

On a GAAP (reported) basis, the company’s earnings of $1.43 per share reflect a stupendous surge of 297.2% from the year-ago quarter.

Revenues in Detail

Revenues grossed $850.5 million in the reported quarter, up 2.4% year over year (up 2.8% at constant exchange rate or CER). The metric beat the Zacks Consensus Estimate of $844.95 million by 0.7%.

Excluding the divested Blood Screening and Medical Aesthetics businesses, total revenues were $773.2 million, up 5% year over year and 5.4% at CER. Excluding the divestitures and the acquired SuperSonic Imagine (SSI) business, organic revenues of $767.1 million increased 4.1% and 4.6% in constant currency.

U.S. revenues of $632.7 million increased 1.8%. Additionally, international revenues of $217.8 million grew 4.3% or 6% in constant currency.

Organically, revenues in the United States rose 3.2% year over year to $588.6 million in the quarter. Moreover, global revenues were up 7.3% (up 9.2% at CER) to $178.5 million.

Segments in Detail

Revenues at the Diagnostics segment rose 5% year over year (up 5.5% at CER) to $311.5 million in the quarter under review, with Molecular Diagnostics being the major driver. Molecular Diagnostics’ revenues of $178.5 million climbed 8.6% (up 9% at CER), continuing the division’s strong performance. However, Blood Screening revenues of $12 million registered a 15.5% dip (down 15.5% at CER).

Revenues at the Breast Health segment increased 2% (up 2.4% at CER) to $331.1 million. Domestic sales drove Breast Health growth in the quarter, with 1.5% revenue rise year over year. However, outside the United States, Breast Health sales increased 5.5% in total but dipped 1.4% (without SSI) against robust growth of 16.1% in the prior-year period.

Although revenues at the GYN Surgical business grew 9.9% (up 10.2% at CER) to $119.1 million (which is the segment’s highest growth rate in 11 quarters), the Medical Aesthetic business revenues of $65.3 million reflects a 18.2% decline (down 17.7% at CER) in the reported quarter on the divestiture of the Cynosure Medical Aesthetics business.

Revenues at Skeletal Health rose 10.8% (up 11.4% at CER) to $23.5 million.

Operational Update

In the fiscal first quarter, Hologic’s adjusted gross margin contracted 60 basis points (bps) to 61.6%. The downside was primarily due to the strong U.S. dollar, an adverse product and geographic sales mix, and divested Cynosure's weak performance.

Adjusted operating expenses amounted to $289.3 million, up 5.3% year over year. Also, adjusted operating margin contracted 170 bps to 27.5%.

Financial Update

Hologic exited the first quarter of fiscal 2020 with cash and cash equivalents of $370.8 million compared with $601.8 million at the end of fourth-quarter fiscal 2019. Total long-term debt was $2.77 billion in the reported quarter compared with $2.78 billion at the end of the year-ago quarter.

At the end of the fiscal first quarter, net cash provided by operating activities was $113.9 million compared with $104.6 million a year ago.

Guidance

Hologic issued guidance for the second quarter and fiscal 2020. For fiscal 2020, the company expects adjusted revenues of $3.24-$3.27 billion (a decline of 3.8-2.9% on a reported basis and 3.5-2.6% at CER). The Zacks Consensus Estimate for revenues stands at $3.36 billion, which is above the company’s guidance.

Hologic envisions adjusted EPS of $2.63-$2.67 for fiscal 2020 (up by 8.2-9.9% on a reported basis). The consensus mark for the metric is pegged at $2.62, which is below the lower end of the company’s guidance range.

For second-quarter fiscal 2020, Hologic anticipates adjusted revenues of $770-$780 million (a decline of 5.9-4.7% on a reported basis and 5.4-4.2% at CER). The consensus estimate for revenues stands at $820.2 million, above the company’s projection.

Adjusted EPS is estimated at 61-63 cents for second-quarter fiscal 2020 (up by 5.2-8.6% on a reported basis). The Zacks Consensus Estimate for the same is pegged at 63 cents, which lies in the upper end of the company’s guidance range.

Our Take

Hologic exited the first quarter of fiscal 2020 on a solid note. Strong top-line growth was led by a solid year-over-year rise in core businesses like GYN Surgical and Molecular Diagnostics. We are upbeat about the recent regulatory clearances for the Unifi Workspace reading solution and 3DQuorum artificial intelligence imaging technology in Breast Health, and the Definity cervical dilator in GYN Surgical. Also, the acquisition of a controlling interest in SSI started to contribute to the company’s top line.

On the flip side, both margins contracted in the quarter under review. Also, the company was hit by lower Brevera capital sales.

Zacks Rank and Key Picks

Hologic currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are SeaSpine Holdings Corporation (NASDAQ:SPNE) , STERIS plc (NYSE:STE) and DexCom, Inc. (NASDAQ:DXCM) , all three currently carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for SeaSpine’s fourth-quarter 2019 revenues is pegged at $43.6 million, suggesting 14.7% growth from the prior-year reported figure. The same for loss per share is anticipated at 44 cents, implying a 16.9% improvement from the year-ago reported number.

The Zacks Consensus Estimate for STERIS’s third-quarter fiscal 2020 revenues is pegged at $749.7 million, hinting at a 7.7% increase from the year-earlier reported figure. The same for adjusted earnings per share stands at $1.43, indicating a 13.5% rise from the year-ago reported figure.

The Zacks Consensus Estimate for DexCom’s fourth-quarter 2019 revenues is pegged at $457 million, suggesting 35.2% growth from the prior-year reported figure. The same for adjusted earnings per share stands at 72 cents, implying a 33.3% improvement from the year-earlier reported figure.

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