Yahoo Finance Here's Why You Should Retain Hologic (HOLX) Stock for Now
Hologic, Inc. HOLX is gaining from the continued strength of the GYN Surgical business. The company’s earnings and revenues in the fourth quarter of fiscal 2022 beat the Zacks Consensus Estimate. However, declining sales and weak margins do not bode well.
In the past six months, this Zacks Rank #3 (Hold) stock has risen 8.2% compared with the 4.2% rise of the industry and the 0.3% rise of the S&P 500.
The renowned medical device company has a market capitalization of $18.42 billion. Its earnings in the fourth quarter of fiscal 2022 surpassed the Zacks Consensus Estimate by 32.3%. Hologic’s long-term expected growth is estimated at 15.2% compared with the industry’s growth expectation of 16.2%.
Let’s delve deeper.
Factors at Play
Q4 Upsides: Hologic delivered better-than-expected earnings in the fourth quarter of fiscal 2022. The company’s molecular diagnostics and Surgical businesses grew strong in the quarter.
Excluding the COVID-19 impact, the molecular diagnostics business grew, primarily on more assays being run through the company’s expanded Panther installed base. This growth was once again broad-based and fueled by a combination of legacy and newer assays in the molecular portfolio.
In Surgical, the business grew nearly 9% organically and more than 11%, including the Bolder acquisition. As anticipated, the company saw procedural volume return and acceleration from its new business lines.
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Molecular Diagnostics Sees Growth Despite Lower COVID-19 Tests: Hologic’s global molecular diagnostics franchise grew 17% at a constant exchange rate, excluding revenues from COVID-19 tests. This upside reflected the high utilization of the company’s expanded Panther installed base.
Strength in GYN Surgical: Over the past two years, the GYN Surgical business has transformed into the most profitable division of Hologic on a percentage basis. It banks on new leadership, the strong strategic execution of new commercial models and new product launches.
Revenues from the GYN Surgical business rose 9% year over year organically and more than 11%, including the Bolder acquisition. As anticipated, the pressure of COVID-19 on the Surgical business abated in the quarter. The major growth drivers of the fiscal fourth quarter were MyoSure Fluent, Bolder and Acessa.
Downsides
Dull Sales Scenario: In the fourth quarter of fiscal 2022, Hologic witnessed a decline in reported revenues compared to the year-ago period. The decline in the top line can be attributed to lower COVID-19 assay sales and supply-chain challenges in the Breast Health business.
Moreover, revenues in the Breast Health segment fell on a year-over-year basis due to the persistent shortage of semiconductor chips.
Foreign Exchange Headwinds: We remain worried about the significant challenges Hologic faced due to an unfavorable foreign currency impact. This has been adversely affecting the company’s overall performance in the past few quarters.
Estimate Trend
In the past 90 days, the Zacks Consensus Estimate for Hologic’s fiscal 2023 earnings has been constant at $3.46.
The Zacks Consensus Estimate for its fiscal 2023 revenues is pegged at $3.81 billion, suggesting a 21.6% fall from the year-ago reported number.
Key Picks
Some better-ranked stocks from the broader medical space that investors can consider are ShockWave Medical, Inc. SWAV, Orthofix Medical Inc. OFIX and Merit Medical System MMSI.
ShockWave Medical, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has rallied 35% against the industry’s 32.6% fall in the past year.
Orthofix Medical, currently sporting a Zacks Rank #1 (Strong Buy), reported a third-quarter 2022 adjusted EPS of 13 cents, which beat the Zacks Consensus Estimate by a stupendous 550%. Revenues of $114 million outpaced the consensus mark by 2.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Orthofix Medical has an estimated next-year growth rate of 58.97%. OFIX’s earnings surpassed estimates in the trailing three quarters and missed in one, the average being 129.1%.
Merit Medical, currently carrying a Zacks Rank of 2, reported a third-quarter 2022 adjusted EPS of 64 cents, which beat the Zacks Consensus Estimate by 20.8%. Revenues of $287.2 million outpaced the consensus mark by 5.2%.
Merit Medical has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average being 25.4%.
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ORTHOFIX MEDICAL INC. (OFIX) : Free Stock Analysis Report
Hologic, Inc. (HOLX) : Free Stock Analysis Report
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ShockWave Medical, Inc. (SWAV) : Free Stock Analysis Report
