Hologic Downgraded By BofA As Cynosure Headwinds Persist

An 8-K filed late Wednesday suggests Hologic, Inc. HOLX’s headed for harder times.

The Analyst

Bank of America Merrill Lynch analyst Derik de Bruin downgraded Hologic from Buy to Neutral and cut the price target from $47 to $42.

The Thesis

Hologic subsidiary Cynosure is expected to lose about $15 million in the fourth quarter in forfeited sales and refunds related to its voluntary recall of Vitalia, as well as reduced sales of MonaLisa Touch. The company previously guided for a $7-million Vitalia-related revenue hit.

Nonetheless, Hologic expects strong top-line growth in other core segments to offset the impact to Cynosure. The company reaffirmed revenue guidance between $800 million and $815 million.

Given poor visibility and continued headwinds from Cynosure — coupled with uncertainty around a Quest Diagnostics Inc DGX contract renewal — Bank of America is withholding its recommendation.

“At this point the fiscal ’19 financial impact of the CYNO recalls and FDA concerns surrounding the VR market are hard to quantify, as it is unclear when HOLX may reintroduce Vitalia or to what extent MLT sales will be reduced,” de Bruin said in a Thursday note. (See his track record here.) 

BofA cut its 2019 bottom-line forecasts from $2.45 to $2.37 to account for lower sales, higher share count and higher interest expense. Hologic’s core business does appear solid, de Bruin said. 

Price Action

Hologic shares were trading 1.18 percent higher at $39.51 at the time of publication Thursday.

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Photo courtesy of Hologic.