Hologic Poised on Solid Quarterly Growth Amid Several Odds - Analyst Blog

On Jun 25, 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 successfully posted two consecutive quarters of solid growth.

In the last reported quarter, Hologic exceeded the Zacks Consensus Estimate as well as the company guidance on both fronts. Adjusted earnings per share of 37 cents increased 7.9% year over year and beat the Zacks Consensus Estimate by 4 cents besides exceeding the company's guidance range of 32–34 cents. Likewise, revenues of $625.0 million steered ahead of the Zacks Consensus Estimate of $610 million and edged past the company's guidance range of $605−$615 million.

Despite looming headwinds such as declining revenues in the core segment, and the ongoing shift to 3D tomosynthesis technology leading to lower sales of legacy products, management seems strategically prepared to get over these challenges.

The major goal of management is to sustain top- and bottom-line organic growth going ahead. The strategy lies in accelerating the performance of the major growth drivers of the company, viz. Diagnostics, Breast Health and Surgical, and establishing a strong foothold globally. The raised fiscal guidance also reinstils our faith in the company.

According to Hologic, global expansion is going to be a critical element of its growth strategy over the long term. While many of the company's best-in-class products command a leading share in the domestic market, they hold a disproportionately low market share internationally. This indicates huge untapped potential. The company expects new executive leadership in this area to help further organic growth in each of the company's businesses on a global basis.

However, despite all of Hologic's attempts, we are wary about the dull third-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 #3 (Hold), some notable stocks in the Medical Instruments sector are Accuray Incorporated ARAY, Globus Medical, Inc. GMED and Masimo Corporation MASI. All the three stocks carry a Zacks Rank #2 (Buy).