On Monday, Hologic HOLX released its fiscal 2024 fourth-quarter financial report after the closing bell, with revenues slightly surpassing the consensus mark. The bottom line fell short of estimates by just 1% after three consecutive quarters of positive surprises. However, both metrics improved on a year-over-year basis. Closing the year with a solid operating margin, Hologic emerged as a top-tier performer within its peer group, with room for improvement in fiscal 2025.
Shares of the Marlborough, MA-based women’s health company have dropped 3.7% since the earnings announcement on Nov. 4, finishing at $79.29 yesterday. Apart from missing the analysts’ earnings forecast, the decline in the stock price can be attributed to the ongoing headwinds in the company’s Skeletal Health division and a cautious outlook for the fiscal 2025 first quarter.
Highlights From Hologic’s Q4 Results
Q4 marked Hologic’s second quarter in a row of top-line growth, signaling a positive shift from the COVID-19-driven declines. Revenues jumped 4.5% to $987.9 million, and non-GAAP earnings per share climbed 13.5% to $1.01. The company continues to gain from a diverse set of durable drivers placed strategically across its businesses.
Core Franchise Performance: The Molecular Diagnostics segment posted 13.2% growth, excluding COVID-19, powered by the ongoing adoption of the BV/CV/TV assay on the company’s high throughput Panther system, strong contributions from Biotheranostics and the respiratory COVID/Flu A/B/RSV assay. In line with the guidance, the cytology and perinatal business posted a modest 0.7% increase.
In Breast Health, the 5.4% organic growth in the quarter was largely from increased breast imaging service revenues, contributions from the gantry business and interventional products. The GYN Surgical arm grew 5.4%, led by MyoSure and the complementary Fluent fluid management system. The international surgical business delivered a broad-based performance driven by expanding access to technologies in new markets.
Profitability Scenario: Hologic’s fiscal fourth-quarter performance also displayed strong operational resilience amid challenges. The non-GAAP gross margin improved 110 basis points year over year to 61.5%, driven by broad-based domestic revenue growth. The company delivered a non-GAAP operating margin of 30%, a modest increase over the prior year. Hologic noted that, excluding the impact of Endomagnetics and currency, operating expenses were nearly flat compared to the prior year. Non-GAAP net income came to $237.5 million, improving 8.3% year over year.
M&A Activity, Share Buybacks: Hologic closed fiscal 2024 with $2.2 billion in cash and cash equivalents and $1.29 billion in operational cash flow. In October 2024, it signed a definitive agreement to acquire Gynesonics, the developer of the Sonata System, for diagnostic intrauterine imaging and transcervical treatment of certain symptomatic uterine fibroids. It repurchased 0.7 million shares for $58 million and plans to buy back $250 million of its common stock via an accelerated share repurchase (ASR) agreement, set to be effective in the fiscal 2025 first quarter.
HOLX Share Price Performance
Year to date, Hologic shares have risen 11% compared with the industry's 6.3% growth and the broader Zacks medical sector’s 2.1% gain. In the same time frame, the company also outperformed peers QIAGEN QGEN and Becton, Dickinson, and Company BDX.
Year-to-Date (YTD) Price Comparison
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HOLX Trades Cheaper
The company’s forward 12-month P/E of 18.3X is lower than both the industry average of 32.6X and its five-year median of 33.0X.
Price-to-Earnings Forward Twelve Months (F12M)
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What’s Next for Investors?
Hologic is expected to keep capitalizing on its groundbreaking product lines, such as the Panther, ThinPrep liquid-based Pap test, 3D mammography, NovaSure and MyoSure — all of which have enhanced the existing standard of care. Building on this foundation, innovative products such as the Panther Fusion, Breast Cancer Index, AI in mammography, Fluent and Acessa are paving the way for the company to achieve long-term growth.
In the fiscal fourth quarter, Hologic launched the Genius Digital Cytology system in the United States, and the feedback from the early adopters has been largely positive. The platform represents a major improvement to the current Pap test workflows. Endomagnetics’ cutting-edge products, such as the Magtrace lymphatic tracer, have bolstered the Breast Health franchise and are poised to drive significant growth in fiscal 2025. HOLX is also gearing up for the upcoming next-generation gantry launch, featuring improved workflow, patient experience and image quality.
With a consistently strong financial position, Hologic has the flexibility to pursue opportunities that fit its capital allocation strategy and add new growth drivers. Both Endomagnetics and Gynesonics are revenue-accretive deals that align well with the company’s global portfolio. Internationally, Hologic foresees a sizeable opportunity to increase its share across all categories where it offers testing. Myosure is benefiting from its presence in vastly underpenetrated markets with high demand for minimally invasive options for the treatment of uterine polyps and fibroids. Although international growth initially dilutes the overall margins, the growing presence eventually opens new opportunities to improve operating leverage.
Concerns Weighing on Hologic
In the fiscal fourth quarter, Skeletal Health revenues plunged nearly 55% year over year from a temporary stop ship in the Horizon DXA shipments due to a non-conformance issue. While shipments are expected to resume in the fiscal 2025 first quarter, Hologic has factored the ongoing impact of the disruption in its full-year and first-quarter guidance. Added to this, the residual impact of the recent hurricanes, including the saline IV fluid shortage, is expected to be a headwind to Hologic’s more elective breast and surgical procedures.
Last month, the company issued a voluntary recall of its BioZorb 3D Bioabsorbable Marker on reports of serious adverse events occurring in patients who had the devices implanted in breast tissue. Subsequently, the FDA issued a safety communication alerting consumers, healthcare providers and healthcare facilities not to use the BioZorb Markers and return all unused devices to Hologic. The product line was initially issued a Class I recall from the regulatory body in May this year, which was more of a corrective measure rather than the product removal.
HOLX Estimate Movement
The company is witnessing a downward revision trend for earnings. Over the past 30 days, estimates for fiscal 2025 have dropped by 4 cents, and fiscal 2026 estimates by 5 cents.
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How to Play HOLX?
Hologic’s diverse and durable strengths drove its fiscal fourth-quarter performance. The company continues to capitalize on its strong balance sheet and robust cash flows to pursue growth opportunities and deploy cash toward both M&A and share repurchases at the same time. Given the stock’s discounted price, staying invested may be prudent for the current shareholders. Meanwhile, the earnings miss in the quarter was discouraging. Those eyeing the stock could wait for a favorable entry point until the company addresses its near-term challenges.
Hologic carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
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