Hologic Inc. ( HOLX ) reported
adjusted earnings per share of 35 cents in the second quarter of
fiscal 2013, higher than the year-ago earnings of 33 cents as well
as the company's expectations of 33−34 cents for the reported
quarter. The result also beat the Zacks Consensus Estimate by a
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On a reported basis, net loss in the second quarter was $51.1
million or 19 cents per share, worse than the net loss of $40.3
million or 15 cents per share in the prior-year quarter.
Revenues were $612.7 million in the quarter, up 30% year over
year. Despite solid growth, the top line was significantly below
the Zacks Consensus Estimate of $644 million and company's guidance
range of $635−$640 million. Revenues exclude the $6.4 million of
contingent revenue received under a collaboration agreement of
Gen-Probe with Novartis. Hologic completed the acquisition of
Gen-Probe on Aug 1, 2012. Revenue growth was led by inclusion of
Gen-Probe revenues, higher sales of MyoSure and tomosynthesis
systems and wider installed base of digital mammography
Subsequent to the Gen-Probe deal, Diagnostics became the largest
segment at Hologic (contributing 48.4% in the second quarter), and
recording revenues of $296.5 million in the reported quarter
compared with $151.8 million in the year-ago quarter. The upside
was primarily due to the inclusion of Gen-Probe revenues for the
full quarter, somewhat offset by lower ThinPrep sales.
The company's other segments − Breast Health, GYN Surgical and
Skeletal Health − recorded respective sales of $220.1 million (up
0.7% year over year), $73.7 million (down 4.5%) and $22.4 million
The upside at the Breast Health segment was driven by a 10.5%,
increase in service revenues from the company's increasing
installed base of digital mammography systems, partially offset by
a 4.4% decline in product revenues. Hologic noted that the decline
in mammography product revenues reflects the ongoing mix shift to
the latest tomosynthesis systems from the company's 2D Selenia and
2D Dimensions product lines. Sale of Hologic's offering for breast
biopsy - Eviva, also improved from the year-ago quarter.
The GYN Surgical business recorded decline on account of
discontinuation of Adiana system, and slower NovaSure system sales
despite higher sales of MyoSure systems. After adjusting for the
discontinuation of Adiana, GYN Surgical revenues improved 1.4%.
Despite higher C-arm sales in the quarter, revenues from Skeletal
Health decreased due to lower sales of densitometry systems and
lower service revenues.
Hologic provided its guidance for the third quarter of fiscal
2013. For the said quarter, the company expects adjusted revenues
of $625−$630 million (representing annualized growth of 33%−34%)
resulting in adjusted earnings of 36−37 cents per share. The
revenue guidance is lower than the current Zacks Consensus Estimate
of $657 million whereas, the company's earnings expectation is
higher than the Zacks Consensus Estimate of 34 cents.
Hologic updated its fiscal 2013 revenue guidance. The company
still expects to report adjusted revenues of $2.53−$2.55 billion
compared with earlier outlook of $2.61−$2.64 billion. The updated
guidance represents 26%−27% growth. The current Zacks Consensus
Estimate of $2.63 billion lies outside the guidance range. The
company also lowered its adjusted EPS guidance to $1.54−$1.56
(earlier guidance was $1.58−$1.60). The Zacks Consensus Estimate of
$1.58 lies outside the guidance range.
Hologic was plagued by several challenges in the last quarter such
as lower sales of legacy products, uncertainties in the European
market, ThinPrep business disruption in China and slower sales
cycle, thereby leading to choppy revenues which not only missed the
Zacks Consensus Estimate but also the company's expectations. If
the downward revision of fiscal 2013 guidance is any indication,
the ongoing concerns are likely to persist for the rest of the
Despite the shortfall in revenues and lower revision of fiscal
guidance, Hologic witnessed several upsides in the quarter such as
strong uptake of tomosynthesis technology, timely progress to gain
synergies from Gen-Probe acquisition, and competitive wins in key
markets among others.
Offering a wide range of products, Hologic is arguably an industry
leader in the field of women's health. Going forward, we are
optimistic about increasing uptake of the company's technically
The stock carries a Zacks Rank #3 (Hold). While we have a neutral
stance on Hologic, other medical stocks such as Accuray
Inc. ( ARAY ),
Intuitive Surgical Inc. ( ISRG ) and
Mindray Medical International Limited ( MR ) warrant a look.
These stocks carry a Zacks Rank #2 (Buy).