) slipped 1.76% to $20.11 after market-close on Feb 4 following
the release of its first-quarter fiscal 2014 results. Adjusted
earnings of 34 cents per share fell 10.5% from the year-ago level
but beat the Zacks Consensus Estimate by 3 cents. The adjusted
number also exceeded the company's guidance range of 30-31 cents.
However, on a reported basis, the company recorded loss of 2
cents per share comparing unfavorably with earnings of 1 cent per
share reported in the prior-year quarter.
Revenues in Detail
Revenues were $612.4 million in the quarter, down 4.9% from
the prior-year adjusted revenues (including Gen-Probe revenues)
of $644.6 million. The top line was on par with the Zacks
Consensus Estimate of $612 million but edged past the company's
guidance range of $600−$610 million. However, revenues were down
3% from the year-ago reported revenues of $631 million.
In the quarter, growth in revenues was driven by strong
performance in the 3D tomosynthesis and MyoSure product lines.
Molecular products like Aptimawomen's health products, Aptima HPV
and cancer-related assays also performed well. Service revenues
also exhibited a favorable increase. However, growth was more
than offset by poor ThinPrep pap test sales in the U.S. and
NovaSure sales along with poor 2D mammography system sales due to
the mix shift to 3D. Unfavorable currency had a negligible impact
Segments in Detail
(46.7% of total revenue) was down 6.6% year over year on a
reported basis and 10.5% year over year on an adjusted basis to
$285.8 million in the reported quarter. The Mar 2013 divestiture
of the Lifecodes business which contributed $12.6 million to the
prior-year quarter's revenues accounted primarily for the
downside. Besides, interval expansion and globally lower average
selling prices led to a decline in ThinPrep pap test sales in the
U.S. Lastly, lower West Nile Virus assay sales resulted in
a decline in revenues from the blood screening. However, this
decline was partially offset by decent performance from the
molecular product line with majority of revenues coming from
Aptima products sales.
Breast Health segment
(36.9% of total revenue) was up 2.6% year over year to $226.5
million. Growth was driven by a 7.5% increase in service revenues
from the company's increasing installed base of digital
mammography systems, along with a rise in biopsy device sales.
Improvement in product sales was driven by an increasing sales
shift to 3D Dimensions systems from 2D Selenia and 2D Dimensions
business (12.9% of total revenue) recorded revenues of $78.9
million, down 2.5% from the comparable prior-year period. The
downfall was on account of lower NovaSure system sales, despite
higher sales of MyoSure systems.
(3.5% of total revenue) were down 10.1% year over year to $21.3
million. The drop in revenues was due to lower sales of bone
densitometry systems and mini C-arm systems.
Hologic's gross margin was 62.4% in the reported quarter, up
590 basis points (bps) year over year. The margin expansion was
on account of favorable product mix in the capital business
related to higher 3D sales combined with higher service
In the reported quarter, adjusted operating expenses amounted
to $302.7 million, down 0.5% year over year. Accordingly,
adjusted operating margin was 12.9%, up 450 bps year over
Hologic exited the quarter with cash and cash equivalents of
$448.6 million compared with $829.4 million at the end of the
same quarter previous year. Total long-term debt as on Dec 28,
2013 was $4.3 billion, down 10.4% year over year.
The company provided its business outlook for second quarter
fiscal 2014 and updated the full year guidance. For the said
quarter, the company expects revenues of $605−$615 million
(representing annualized decline of 1% to 2%) resulting in
adjusted earnings of 32−34 cents per share. The Zacks Consensus
Estimate for revenues and EPS of $609 million and 33 cents
respectively, fall within the predicted range.
For the full year, the company reaffirmed its expectation to
report adjusted revenues of $2,425−$2,475 million, representing a
1−3% decline over the last year. The current Zacks Consensus
Estimate of $2,470 million is in line with the guidance range.
However, the company tightened its adjusted EPS guidance to the
range of $1.34−$1.38 from earlier range of $1.32-$1.38. The Zacks
Consensus Estimate of $1.36 falls in the middle of the guidance
Hologic delivered an average performance in the fiscal first
quarter. Although the company is plagued by challenges like
decline in revenues from the core segment and ongoing shift to 3D
tomosynthesis technology, management seems to be strategically
prepared to get over these challenges. The major goal of
management is to sustain top- and bottom-line organic growth. The
strategy is to accelerate the performance of the major growth
drivers of the company, i.e. Diagnostics, Breast Health and
Surgical, and establish a strong foothold globally. We believe
that with products like PANTHER instrument platform, 3D
tomosynthesis system and MyoSure in its portfolio, Hologic has
the potential to do well.
Currently, Hologic carries a Zacks Rank #3 (Hold). Some
better-ranked stocks in the overall healthcare sector worth
Natus Medical Inc.
). While Natus Medical sports a Zacks Rank #1 (Strong Buy),
ABIOMED and AngioDynamics carry a Zacks Rank #2 (Buy).
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