Hologic’s HOLX progress in the domestic and international markets, a strong pipeline of products and continued solid performance of the Molecular Diagnostics segment bolster our confidence. The stock carries a Zacks Rank #2 (Buy).
Over the past year, Hologic has outperformed its industry. The stock has gained 20.7% compared with the industry’s 17.9% rise.
Hologic delivered better-than-expected revenues and earnings in the second quarter of fiscal 2023. The company’s Breast Health segment registered strong growth, driven by improving semiconductor chip supply, which enabled additional gantry deliveries within the quarter. This resulted in higher capital equipment revenues compared to the prior year period.
Hologic has been making impressive progress in its Breast Health arm in recent times. The company is currently focusing on expanding its strategy to diversify its business across the patient continuum of care. It has also launched new software products based on its investments in artificial intelligence and strengthened its interventional franchise via the Brevera relaunch.
Hologic, Inc. Price
Hologic, Inc. price | Hologic, Inc. Quote
The GYN Surgical business grew organically as the company registered procedural volumes return and acceleration from new business lines. Moreover, the company raised the 2023 guidance, raising optimism about the stock.
In Diagnostics, Molecular Diagnostics continued to register strong growth during the fiscal second quarter. The growth was driven by the BV and CV/TV vaginitis panels and aided by the core sexually transmitted infection (STI) menu, including Clemidiagonrhia, Human papillomavirus (HPV) and Trichomoniasis. The company witnessed strong contributions from Biotheranostics and the respiratory menu on Panther Fusion during the quarter.
In order to streamline its operations and reduce cost of revenues, Hologic has been adopting a few significant strategies over the past few years. The company has invested deliberately and opportunistically in commercial areas where management has recognized a good return. These include Hologic’s Genius marketing campaign in Breast Health, cervical cancer co-testing initiatives in Diagnostics, along with efforts to gain competitive market share with NovaSure. Per management, these strategic initiatives are already paying off through increased brand awareness, market share gains, and price stability, all of which will contribute to the company’s higher sales.
On the flip side, in the second quarter of fiscal 2023, Hologic witnessed a year-over-year decline in both revenues and earnings were significantly down. The significant decline in COVID-19 assay revenues dragged total revenues down. It also reported a contraction in both margins, which looks discouraging.
The company-provided adjusted gross margin contracted 890 basis points during the quarter. According to the company, the downside in gross margin was primarily due to a year-over-year decline in COVID-19 assay sales. The company’s adjusted operating margin contracted 1610 bps.
We remain worried about the significant challenges Hologic faces owing to unfavorable foreign currency. These have been affecting its overall performance in the past few quarters.
Key Picks
Some other top-ranked stocks in the broader medical space are CONMED CNMD, Merit Medical Systems, Inc. MMSI and Boston Scientific Corporation BSX.
CONMED, a Zacks Rank #2 stock has an estimated long-term growth rate of 19.4%. The company’s earnings surpassed estimates in two of the trailing four quarters, missed once and met in another, delivering a negative average surprise of 10.54%.
CNMD’s shares have risen 54.2% in the past year compared with the industry’s 21.3% growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Merit Medical, currently carrying a Zacks Rank #2, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.2%.
Merit Medical stock has surged 60.2% compared with the industry’s 21.3% growth over the past year.
Boston Scientific, presently holding a Zacks Rank #2, has an estimated long-term growth rate of 11.5%. BSX’s earnings surpassed estimates in two of the trailing four quarters and missed twice, the average surprise being 1.9%.
Boston Scientific has gained 50.1% against the industry’s 19.2% decline over the past year.
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