Hologic Beats Estimates - Analyst Blog
November 08 2011 - 3:30AM
Zacks
Hologic (HOLX)
reported an adjusted EPS of 34 cents during the fourth quarter of
fiscal 2011, a penny above the Zacks Consensus Estimate and 4 cents
above the year-ago figure. Revenues were $467 million, an increase
of 9% year over year and higher than the Zacks Consensus Estimate
of $458 million. For fiscal 2011, revenues increased 6.5% to
$1789.3 million resulting in an adjusted EPS of $1.26 compared with
$1.18 in fiscal 2010 and a penny above the Zacks Consensus
Estimate.
Segments
Hologic operates through four
segments − Breast Health, Diagnostics, GYN (Gynecology) Surgical
and Skeletal Health − each contributing a corresponding 47%, 32%,
16% and 5% to total revenue during the quarter. These segments
recorded robust growth of 10.9% year over year (at $219.1 million),
11.7% ($150.5 million), 1.4% ($74 million) and 2.1% ($23.4
million), respectively.
The upside at the Breast Health
segment was driven by a 9.2% product revenue growth coupled with a
14.4% rise in service revenue related to Hologic’s increased
installed base of digital mammography systems. Product revenue
growth was driven by shift in sales from Selenia to Dimensions,
stronger sales of breast biopsy products led by Eviva and the
inclusion of a full quarter of sales from Sentinelle Medical
(acquired in August 2010).
Growth at the Diagnostic segment
was driven by increased revenues from both Cervista HPV and
ThinPrep. Besides, incremental ThinPrep revenue from the TCT
acquisition was $10 million during the reported quarter.
The marginal increase in GYN
Surgical revenues was primarily due to inclusion of MyoSure
revenues and growth in sales of Adiana products, offset by lower
sales of NovaSure system. The increase in Skeletal Health revenues
emanated from higher sales of bone densitometry units.
Over the past few months, Hologic
has received approvals from the US Food and Drug Administration for
a number of its products. These include Trident specimen
radiography system, Sentinelle Endo Coil Array for pelvic imaging
and the new 16 channel Sentinelle Breast Coil. The company also
received CE Mark approval for Cervista MTA (Medium Throughput)
system, which automates the DNA extraction and HPV detection steps
of the Cervista HPV HR test.
Margins
During the reported quarter, gross
margin improved 100 basis points (bps) year over year to 61.9%.
However, a 4.9% rise in research and development expenses, a 21.4%
increase in selling and marketing expenses and 6% higher general
and administrative expenses led to a 13% increase in operating
expenses to $143.7 million. Despite spiraling expenses,
operating margin remained almost flat at 31.1% on a year-over-year
basis.
Guidance
Hologic provided its guidance for
the first quarter of fiscal 2012 and full year 2012. For the first
quarter, the company expects to report $465−$470 million of
revenues (representing annualized growth of 8−9%) resulting in
adjusted EPS of 32 cents. The Zacks Consensus EPS Estimate of 33
cents is marginally ahead of the company’s guidance, while the
revenue outlook of $467 million lies within the company’s guided
range.
For fiscal 2012, Hologic expects to
report revenues of $1900−$1925 million (growth of 6−8%) with
adjusted EPS of $1.35−$1.37. The Zacks Consensus EPS Estimate of
$1.38 is higher than the company’s forecast while the revenue
forecast of $1908 million remains within the range.
Our Take
With a wide range of products,
Hologic has become an industry giant in the field of women’s health
products. Moreover, the company is also undertaking several steps,
including acquisitions, international expansion and product
development to bolster its top line.
However, the company continues to
be affected by lower visits to physicians due to the prevailing
economic uncertainty. This is evident from the company’s guidance
which is primarily based on the recently made acquisitions and to a
lesser extent on organic growth. Hologic also witnesses tough
competition from players like Qiagen (QGEN),
Conceptus (CPTS), among others. The stock retains
a Zacks #4 Rank (Sell) in the short term.
Over the long term, we are Neutral
on Hologic, in line with its peers. Both Qiagen and Conceptus carry
Zacks #3 ranks (Hold) in the short term.
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