) reported net income of $23.6 million or 9 cents per share in the
third quarter of fiscal 2012 compared with $36.2 million or 14
cents per share. After taking into account certain one-time items,
adjusted earnings per share ('EPS') came in at 35 cents, a penny
ahead of the Zacks Consensus Estimate and beating the adjusted EPS
of 32 cents in the year-ago period.
Revenues were $470.2 million, an increase of 4.2% year over year
but were short of the Zacks Consensus Estimate of $477 million.
Reported revenues lagged the low-end of the company's guidance
range of $475-$480 million. Hologic had reported preliminary
third-quarter results earlier this month.
Hologic operates through four segments − Breast Health,
Diagnostics, GYN (Gynecology) Surgical and Skeletal Health − with
each contributing a corresponding 45%, 34%, 16% and 5% to total
revenue during the quarter. These segments recorded respective
sales of $211.5 million (up 3.1% year over year), $158.7 million
(up 10.6%), $77.7 million (down 2.1%) and $22.4 million (down
The upside at the Breast Health segment was driven by an
increase in service revenues related to the growing installed base
of digital mammography systems, specifically 2D and 3D Dimensions
systems. While we are impressed with the step up in orders for the
3D platform, some orders could not be shipped during the reported
quarter due to some additional requirements at the customer site
thereby delaying installation. As a result, the backlog of orders
increased at the end of the quarter on a sequential basis.
Meanwhile, Hologic has reached over 45% of its goal of placing
500−700 3D systems in US within two years of launch and is on track
to achieve the 60% level by the end of the current fiscal.
Growth at the Diagnostic segment was driven by higher ThinPrep
revenues and sales of molecular diagnostics products. Besides,
incremental ThinPrep revenue from the TCT acquisition amounted to
$8.3 million in the reported quarter, up nominally from $8.2
million during the last quarter. Earlier this month, Hologic's
Cervista HPV HR test received approval in the Netherlands.
The drop in GYN Surgical revenues was primarily due to lower
sales of NovaSure and Adiana systems, offset by growth in MyoSure
system sales that nearly tripled compared to last year. However,
after adjusting for the discontinuance of Adiana, sales recorded 3%
growth year over year and 4% sequentially. As a reminder, the
company had decided to discontinue the product line in the last
quarter as it was not found to be commercially viable and preferred
to focus on its core products. We are encouraged by the focus of
the sales force on NovaSure that resulted in 3% sequential growth
during the quarter.
The decline in Skeletal Health revenues emanated from lower
sales of bone densitometry units, partially offset by increase in
Mini C-Arm product sales.
Hologic announced that it has received all regulatory approvals
and is in the process of arranging debt financing for the
), a player in the field of molecular diagnostics. The transaction
is expected to be closed shortly.
Hologic provided its guidance for the fourth quarter of fiscal
2012. For the said quarter, the company expects to report $485
million of revenues (representing annualized growth of 4%)
resulting in adjusted EPS of 35−36 cents, in line with the current
Zacks Consensus EPS Estimate. The current Zacks Consensus revenue
estimate stands at $490 million, higher than the company's
Hologic reiterated its fiscal 2012 outlook for both revenues and
EPS. The company expects to report revenues of $1.9 billion
representing 6% growth with adjusted EPS in a band of
Hologic witnessed a challenging third quarter with the economic
uncertainties in Europe, slower sales cycles and increasing pricing
pressure. Apart from margin erosion on European sales, revenues
were impacted by more than $4 million because of these headwinds.
We are concerned about the economic environment with barely any
recovery expected in the near term.
However, the increasing acceptance of the 3D Dimensions system
is a cause to cheer. We also believe that revenues from GYN
Surgical should improve in the forthcoming period with increased
focus on NovaSure and MyoSure systems. Offering a wide range of
products, Hologic has become an industry giant in the field of
We are also bullish about the proposed Gen-Probe acquisition,
which will strengthen the company's foothold in the HPV business.
This specialized niche has players like
) among others. However, an increasing debt burden along with
higher interest expense will continue to affect the bottom
We have a Neutral recommendation on Hologic. The stock retains a
Zacks #3 Rank ("Hold") in the short term.
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