) reported adjusted earnings per share of 38 cents in the third
quarter of fiscal 2013, higher than the year-ago earnings of 35
cents as well as the company's expectations of 36−37 cents. The
result also beat the Zacks Consensus Estimate by a penny.
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On a reported basis, net loss in the third quarter was almost $11
million or 4 cents per share, worse than the net income of $23.6
million or 9 cents per share in the prior-year quarter.
Quarter in Detail
Revenues were $626.1 million in the quarter, up 33.2% year over
year. Despite solid growth, the top line was below the Zacks
Consensus Estimate of $629 million. However, revenues were within
the company's guidance range of $625−$630 million. On a proforma
basis (including Gen-Probe revenues in the prior-year quarter),
revenues were 2% higher year over year.
Revenue growth was led by inclusion of Gen-Probe revenues, higher
sales of MyoSure and record high placement of 3D Dimensions
tomosynthesis systems and higher service revenues on the back of
wider installed base of digital mammography systems. However,
growth was partially offset by a decline in sales of legacy
products, mainly ThinPrep, NovaSure, 2D Selenia and 2D Dimensions
mammography systems and discontinuation of Adiana permanent
contraception system in fiscal 2012.
Subsequent to the Gen-Probe deal, Diagnostics became the largest
segment at Hologic (contributing 47.5% in the second quarter).
The core segment recorded robust growth of 87.4% year over year
to $297.4 million in the reported quarter. The upside was
primarily led by the inclusion of the Gen-Probe portfolio,
somewhat offset by lower ThinPrep sales and weaker contributions
from legacy products.
The company's other segments − Breast Health, GYN Surgical and
Skeletal Health − recorded respective sales of $230 million (up
8.8% year over year), $75.8 million (down 2.4%) and $22.9 million
The upside at the Breast Health segment was driven by a 7.2%
increase in service revenues from the company's increasing
installed base of digital mammography systems, along with a 9.7%
rise in product revenues. The growth in product revenues was a
major positive after lower revenues in the last quarter.
Until the second quarter, the decline in mammography product
revenues reflected the ongoing mix shift to the latest
tomosynthesis systems from the company's 2D Selenia and 2D
Dimensions product lines. In the reported quarter, the company
witnessed record sales of 3D Dimensions system, driving product
revenue growth. 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% in the quarter. On the other hand, revenues from Skeletal
Health increased due to higher sales of densitometry systems and
mini C-arm systems.
Hologic exited the third quarter with cash and cash equivalents
of $964.4 million, higher than $566.1 million at the end of
fiscal 2012. The company's long-term debt of about $5,004.6
million at the end of the quarter was almost in line with the
debt of $5,035.6 million at the end of the prior fiscal.
Hologic provided its guidance for the fourth quarter of fiscal
2013. For the said quarter, the company expects revenues of
$615−$620 million (representing annualized growth of 2%−4%)
resulting in adjusted earnings of 36−37 cents per share. The
revenue guidance is way below the current Zacks Consensus
Estimate of $653 million whereas, the Zacks Consensus Estimate of
37 cents tallies with the high end of the company's forecast.
Hologic updated its fiscal 2013 revenue guidance. The company
expects to report adjusted revenues of $2,505−$2,515 million
compared with the earlier outlook of $2,530−$2,550 million. The
updated guidance represents 24%−25% growth. The current Zacks
Consensus Estimate of $2,542 million lies outside the guidance
range. The company also lowered its adjusted EPS guidance to
$1.46−$1.47 against the earlier guidance of $1.54−$1.56. The
Zacks Consensus Estimate of $1.54 lies outside the guidance
Notwithstanding the EPS result that edged past the Zacks
Consensus Estimate, Hologic reported a dull quarter with
disappointing outlook for the fourth quarter of fiscal 2013. In
fact, the company's expectations for fourth-quarter top-line
reflect revenue decline on a proforma basis. The lower revision
of guidance for fiscal 2013 was another downside. As a result,
the stock sank 3.69% in after-hours trading on the day of the
In our opinion, the third-quarter results reflect that Hologic is
still plagued by several challenges - primarily lower sales of
legacy products, ongoing shift to 3D tomosynthesis technology and
tough capital spending environment among others. If the downward
revision of fiscal 2013 guidance is any indication, the ongoing
concerns are likely to persist for the rest of the fiscal.
The stock carries a Zacks Rank #4 (Sell). While we prefer to
Mindray Medical International Limited
IDEXX Laboratories, Inc
) are worth considering. These stocks carry Zacks Rank #2 (Buy).