We have reaffirmed our Neutral recommendation on
) with a target price of $21.00.
The company's fourth-quarter 2012 adjusted earnings of 37
cents per share were ahead of the Zacks Consensus Estimate by a
penny, and beat the year-ago adjusted earnings of 34 cents as
well. Revenues increased 26% to $588.5 million, surpassing the
Zacks Consensus Estimate of $559 million.Despite several
challenges such as economic uncertainties in Europe, slower sales
cycles and increasing pricing pressure, we are encouraged with
the company's encouraging performance.
Hologic, with its wide range of products, has become an
industry giant in the field of women's health. Subsequent to the
Gen-Probe acquisition (
, Diagnostics became the largest segment at Hologic (representing
44% of the total sales of Hologic in the last reported quarter).
The acquisition is expected to help the company derive a major
share of its revenues from the diagnostics business with access
to Gen-Probe's molecular diagnostic platforms of Tigris and
We are also encouraged to note that excluding the Gen-Probe
impact, almost three-fourths of the company's growth came from
the core diagnostics businesses, primarily ThinPrep Pap test,
with the balance coming from the molecular diagnostics products.
Worldwide ThinPrep test volume increased substantially and
revenues increased 6% on the back of a strong performance by the
company's subsidiary TCT, in China.
However, Breast Health, another important segment of the
company witnessed a slight decline in revenues in the fourth
quarter, mainly due to the ongoing shift from the company's
legacy Selenia to Dimensions product lines as well as lower sales
due to the economic weakness in the international market.
However, we encouragingly note that, the quarter's sales
benefited from the delayed U.S. shipments of the 3D tomosynthesis
backlog at the end of the third quarter as well as strong fourth
quarter orders resulting in a 17% sequential increase in the 3D
tomosynthesis backlog. We believe that the favorable
reimbursement decision for tomosynthesis, likely next year,
should further drive growth. Moreover, publication of clinical
results from some key studies is expected in the near term.
We are encouraged by Hologic's focus on the international
market that contributed 27% of its revenues during the reported
quarter. Despite the persistent economic uncertainties in Europe,
Hologic has been building its international infrastructure and
fortifying management resources, particularly in the emerging
markets of China, Latin America, the Middle East and Eastern
Europe.The company has acquired TCT (a distributor of medical
products including Hologic's ThinPrep Pap tests and others) for
$135 million and Healthcome Technology (manufacturer of
mammography systems) for $16.9 million, both based in China.
Following the acquisition of TCT, China became Hologic's largest
ThinPrep market outside the U.S.
Recently, Hologic received an unfavorable ruling in a patent
infringement suit with
Smith & Nephew
). The suit involved the sale of MyoSure tissue removal device,
which was included in Hologic's portfolio with the acquisition of
Our neutral recommendation is backed by a Zacks #3 Rank
('Hold') in the short term.
HOLOGIC INC (HOLX): Free Stock Analysis
SMITH & NEPHEW (SNN): Free Stock Analysis
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