Balanced View on Hologic - Analyst Blog

On Mar 27, we issued an updated research report on Hologic Inc. HOLX – provider of diagnostics, medical imaging systems and surgical products for women's health. After several quarters of dismal performances, Hologic posted improved first-quarter fiscal 2014 results with a bottom-line beat and in-line revenues.

In the quarter, adjusted earnings per share EPS of 34 cents fell 10.5% year over year but managed to beat the Zacks Consensus Estimate by 3 cents. The results also exceeded the company's expectation range of 30–31 cents. Revenues of $612.4 million came on par with the Zacks Consensus Estimate of $612 million but successfully edged past the company's guidance of $600−$610 million.

Even amid looming headwinds such as declining revenues in the core segment; the ongoing shift to 3D tomosynthesis technology leading to lower sales of legacy products; European uncertainty and increasing pricing pressure, Hologic's top line received a boost from strong performances in the 3D tomosynthesis and MyoSure product lines. Hologic is currently leaving no stone unturned to consolidate its operations and realize potential synergies.

At the same time, management seems strategically prepared to get over these challenges soon. Earlier this month, the company announced major upper management churns, including some organizational restructuring. According to Hologic, these restructuring initiatives will help it achieve corporate objectives including organic growth and executional excellence on a global level.

Hologic has braced itself to enhance the performances of its major growth drivers viz. Diagnostics, Breast Health and Surgical, and establish a strong foothold globally. The new executive leadership structure, if they are of any indications, should help accelerate organic growth in each of the company's businesses on a global basis, and improve operational and financial efficiency going ahead.

However, despite all of Hologic's attempts, we are wary about the dull second-quarter guidance provided by the company which hints that the ongoing concerns may persist in the coming fiscal as well.

Other Stocks to Consider

While Hologic carries a Zacks Rank #2 (Buy), some other stocks worth considering in the same sector are ABIOMED, Inc. ABMD, Cyberonics Inc. CYBX and DexCom, Inc. DXCM. All the three stocks carry a similar Zacks Rank #2 (Buy).