Is a Surprise in Store for Hologic (HOLX) in Q1 Earnings?

Hologic Inc.HOLX is slated to report first-quarter fiscal 2017 financial results on Feb 1, after the closing bell.

Last quarter, the company posted a positive earnings surprise of 4.00%. Notably, Hologic's earnings surpassed the Zacks Consensus Estimate in all of the past four quarters, with an average beat of 6.05%.

Let's see how things are shaping up prior to this announcement.

Factors at Play

Post its impressive fourth-quarter fiscal 2016 report, Hologic has been involved in a series of developmental strategies. The company entered into a global collaboration deal with Korea-based Seegene to develop high multiplex real-time reagents for its Panther Fusion system that is currently being developed. We believe that the tie-up will help broaden Hologic's Panther Fusion system line of products and strengthen its position in the molecular diagnostic market in the forthcoming quarters.

Hologic Inc. Price and EPS Surprise

Hologic Inc. Price and EPS Surprise | Hologic Inc. Quote

The company has also announced the sale of its loss-making blood screening business to commercial partner, Grifols. The motive behind the divestiture is to drive sustainable growth by accelerating the top as well as the bottom line and boosting financial flexibility. This may also drive investors' confidence in the stock.

Meanwhile, Hologic received several regulatory approvals for its Aptima Quant assay series to complement women's health diagnostics. The company obtained Canadian Approval for Aptima Hepatitis C and B Quant Assays and also received CE mark for its Aptima HSV 1 & 2 assay. Recently, the FDA granted PMA approval for another of Hologic's Aptima HIV-1 Quant viral load monitoring assays.

Coming to recent launches, the company introduced the next-generation NovaSure ADVANCED global endometrial ablation system to enhance the treatment of abnormal uterine bleeding. This should also boost the upcoming quarterly results.

On the flip side, even though Hologic has decided to vend its loss-making blood screening business, the transaction has not been completed. In the past quarter, the business faced a considerable decline due to lower blood utilization and fluctuating ordering patterns by its partner. We expect these weaknesses to persist in the yet-to-be-reported quarter, hampering the top line growth.

Besides, currency headwinds, escalating operating expenses and intense competition, particularly in the tomosynthesis market, continue to raise concern. Over the past few quarters, Hologic has witnessed several challenges such as restricted capital spending environment, economic uncertainties in Europe, slower sales cycles and increasing pricing pressure. We expect these problems to linger in the future as well.

We take a note that Hologic's estimate revision trend is unfavorable.For the current quarter, Hologic saw no upward but one downward movement in estimates over last seven days. Also, the magnitude of the trend is in line with the revision, with earnings estimates slipping 1.9% over the same time frame.

Earnings Whispers

Our proven model does not conclusively show that Hologic is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Hologic has an Earnings ESP of 0.00%.That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 50 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Hologic has a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat in the upcoming quarter:

Cempra Inc. CEMP has an Earnings ESP of +15.79% and a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Molina Healthcare Inc. MOH has an Earnings ESP of +5.33% and a Zacks Rank #2.

Universal Health Services, Inc. UHS has an Earnings ESP of +4.97% and a Zacks Rank #2.

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Hologic Inc. (HOLX): Free Stock Analysis Report

Molina Healthcare Inc. (MOH): Free Stock Analysis Report

Universal Health Services Inc. (UHS): Free Stock Analysis Report

Cempra Inc. (CEMP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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