Recently, we reiterated our Neutral recommendation on Hologic (HOLX) with a target price of $23.00.
Hologic reported an adjusted EPS of 30 cents in the second quarter of fiscal 2011, surpassing the Zacks Consensus Estimate by 2 cents and a penny above the year-ago quarter. Revenues were $438.7 million, an increase of 4.9% compared to the prior-year quarter and higher than the Zacks Consensus Estimate of $433 million.
Hologic operates through four segments − Breast Health, Diagnostics, GYN (Gynecology) Surgical and Skeletal Health − which contributed 47%, 32%, 16% and 5%, respectively to the total revenue during the quarter. Barring Diagnostics revenue, which declined 1.2% to $138.2 million during the quarter, the other three segments recorded a robust growth of 8.7% ($205.9 million), 6.5% ($71.5 million) and 7.1% ($23.1 million), respectively.
In February 2011, Hologic received FDA approval for its Selenia Dimensions 3D mammography system. The 3-D images are superior compared to the 2-D images and help doctors to more accurately detect and diagnose breast cancer in addition to lowering recall rates. Since approval, the company has upgraded a number of domestic systems and is pleased with the early uptake so far although adoption of the product would be a gradual process. Consequently, a rapid ramp up in system sales is not expected this year.
Hologic has carried out several tuck-in acquisitions in the past, which should boost its top line going ahead. In this respect, the January 2011 acquisition of Interlace Medical is worth mentioning, which manufactures MyoSure hysteroscopic tissue removal system.
Hologic plans to begin physician training and education programs, and ramp up production for MyoSure with full market launch in the third quarter. For fiscal 2011, the company has adopted a conservative view and expects just under $10 million from the product.
However, the company faces stiff competition from players such as Conceptus (CPTS), Qiagen (QGEN), among others. Moreover, the economic uncertainty is taking a toll on Hologic. High unemployment is forcing many people to defer their physician visits, thereby impacting volumes for ThinPrep, which in turn negatively impacted diagnostics revenues.
The company derived about 24% of its revenues from capital equipments. As a result, the company is exposed to lower hospital spending exacerbated by economic challenges.
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HOLOGIC INC (HOLX): Free Stock Analysis Report
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