Hologic (HOLX) reported an adjusted EPS of 30 cents during 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.
The strong growth witnessed by Breast Health was primarily driven by the rise in revenue from services related to Hologic’s increased installed base of digital mammography systems, the inclusion of Sentinelle Medical (acquired in August 2010) and breast biopsy business led by Eviva breast biopsy product.
Diagnostics revenue continued to decline due to a reduction in ThinPrep pap tests volume resulting from reduced patient visits in a period of economic uncertainty. However, increased revenues from Cervista tests and other molecular diagnostic products provided some cushion to the decline.
The increase in GYN Surgical revenues primarily came on the back of growth in sales of Adiana devices and to a lesser extent, sales of MyoSure. The increase in Skeletal Health revenues was driven by higher sales of bone densitometry units.
In a positive development, Hologic received approval from the US food and Drug Administration (FDA) for its Selenia Dimensions 3-D digital breast tomosynthesis system in February 2011. Moreover, in January the company acquired Interlace Medical, a developer of the MyoSure hysteroscopic tissue removal system.
Guidance
Hologic provided its guidance for the third quarter of fiscal 2011 and raised fiscal 2011 outlook. In the third quarter, the company expects to report $443−$448 million of revenues (representing annualized growth of 5%−6%) resulting in adjusted EPS of 31−32 cents. The Zacks Consensus EPS Estimate of 31 cents is within the company’s guidance.
For fiscal 2011, Hologic raised its outlook for revenue and adjusted EPS to $1.76−$1.77 billion (previous guidance: $1.73−$1.76 billion) and adjusted EPS of $1.24−$1.26 ($1.22−$1.24), respectively. The current Zacks Consensus Estimate for revenue and adjusted EPS stand at $1.76 billion and $1.23, respectively.
Hologic raised its annual guidance based on some stability in the capital equipment market, contributions from the recently-approved Dimensions 3D mammography system and better outlook for GYN Surgical business.
Recommendation
With a wide range of products, Hologic has become an industry giant in the field of women’s health products. Besides, approval of the Dimensions 3D system is a major breakthrough for the company and should help generate higher revenues.
Moreover, the company is also undertaking several steps, including acquisitions, international expansion and product development to bolster its top line. However, the company witnesses tough competition from players like Abbott Laboratories (ABT), Qiagen (QGEN), Conceptus (CPTS), among others.
We are currently Neutral on Hologic.
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