Hologic
(
HOLX
) reported net income of $3.1 million or a penny per share in the
first quarter of fiscal 2013 compared with $20.8 million or 8
cents per share in the year-ago quarter. After taking into
account certain one-time items, adjusted earnings came in at 38
cents. The result surpassed both the company's guidance and the
Zacks Consensus Estimate by a penny and beat the year-ago
adjusted earnings of 34 cents as well. The reported quarter's
adjusted EPS includes a benefit of a penny related to the
legislative changes associated with the reinstatement of the
federal research tax credit.
Revenues were $631.4 million in the quarter, up 33.7% year
over year, but significantly below the Zacks Consensus Estimate
of $646 million. However, this was excluding the $13.3 million of
contingent revenue received under an agreement of Gen-Probe with
Novartis
(
NVS
). Hologic completed the acquisition of Gen-Probe on Aug 1,
2012.
Segments
Subsequent to the Gen-Probe deal, Diagnostics became the
largest segment at Hologic, recording revenues of $305.9 million
during the reported quarter compared with $154.1 million in the
year-ago quarter. The upside was primarily due to the inclusion
of Gen-Probe revenues for the full quarter, higher international
ThinPrep revenues and strong growth in the molecular diagnostics
products.
The company's other segments − Breast Health, GYN Surgical and
Skeletal Health − recorded respective sales of $220.8 million (up
2.5% year over year), $80.9 million (up 3.0%) and $23.7 million
(down 4.1%).
The upside at the Breast Health segment was driven by a 12.2%,
increase in service revenues from the company's growing installed
base of digital mammography systems, partially offset by a 2.2%
decline in product revenues. Hologic noted that the decline in
mammography product revenues reflects the ongoing mix shift to
the Dimensions product lines from the company's legacy
Selenia.
After adjusting for the discontinuance of Adiana, the GYN
Surgical business recorded growth primarily from an increase in
MyoSure hysteroscopic tissue removal (MyoSure) system sales.
Guidance
Hologic provided its guidance for the second quarter of fiscal
2013. For the said quarter, the company expects adjusted revenues
of $635−$640 million (representing annualized growth of 35%−36%)
resulting in adjusted earnings of 33−34 cents per share, lower
than the current Zacks Consensus Estimate of 38 cents. The
revenue guidance excludes an expected purchase accounting
reduction of $5.2 million related to the Novartis
collaboration.
Hologic reaffirmed its fiscal 2013 revenue guidance. The
company still expects to report adjusted revenues of $2.61−$2.64
billion, representing 30%−31% growth. However, the company
increased its adjusted EPS guidance to $1.58−$1.60 (earlier
guidance was $1.56−$1.58). This 2 cents increase was due to the
recently-reinstated federal research tax credit, partially offset
by an increase in expected operating expenses.
Recommendation
Despite several challenges such as economic uncertainties in
Europe, slower sales cycles and increasing pricing pressure, we
are encouraged with the increasing acceptance of the 3D
Dimensions system. We are also encouraged with the improving
growth in GYN Surgical, with increased focus on NovaSure and
MyoSure systems. Offering a wide range of products, Hologic has
become an industry giant in the field of women's health.
With the Gen-Probe acquisition, Hologic has further
strengthened its foothold in the HPV business. Moreover, an
increasing debt burden along with higher interest expense will
continue to affect the bottom line. The company now carries a
Zacks Rank #3 (Hold).
While we prefer to remain on the sidelines for Hologic, other
medical device stocks worth a look are
Cyberonics Inc.
(
CYBX
) and
ResMed Inc.
(
RMD
). All these stocks carry a Zacks Rank #1 (Strong Buy).
CYBERONICS INC (CYBX): Free Stock Analysis
Report
HOLOGIC INC (HOLX): Free Stock Analysis
Report
NOVARTIS AG-ADR (NVS): Free Stock Analysis
Report
RESMED INC (RMD): Free Stock Analysis Report
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