CPTS Conceptus, Inc. (MM)

Hologic (HOLX) reported an adjusted EPS of 34 cents during the first quarter of fiscal 2012, a couple of cents above the Zacks Consensus Estimate and 4 cents above the year-ago figure. Revenues were $472.7 million, an increase of 9.3% year over year and higher than the Zacks Consensus Estimate of $466 million.

Segments

Hologic operates through four segments − Breast Health, Diagnostics, GYN (Gynecology) Surgical and Skeletal Health − each contributing a corresponding 46%, 33%, 16% and 5% to total revenue during the quarter. These segments recorded robust growth of 10.2% year over year (at $215.4 million), 10.8% ($154.1 million), 3.8% ($78.5 million) and 10.3% ($24.7 million), respectively.

The upside at the Breast Health segment was driven by a 10.9% increase in product revenue and a 9% 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 to a lesser extent an increase in the total number of digital mammography systems sold.

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 $7.3 million during the reported quarter.

The marginal increase in GYN Surgical revenues was primarily due to inclusion of MyoSure revenues, partially offset by lower sales of NovaSure system. However, on a sequential basis, NovaSure system sales increased by 5%. The increase in Skeletal Health revenues emanated from higher sales of bone densitometry units.

In the recent past, Hologic has received some significant product approvals. These include approval from US Food and Drug Administration for the Cervista High Throughput Automation (HTA) system for HPV Screening. The company also received CE Mark approval for C-View synthesized 2D image reconstruction algorithm for 3D mammography exams and a nod in China for the Serenity digital mammography system.

Guidance

Hologic provided its guidance for the second quarter of fiscal 2012. For the said quarter, the company expects to report $470−$475 million of revenues (representing annualized growth of 7−8%) resulting in adjusted EPS of 33 cents, in line with the Zacks Consensus EPS Estimate. The current Zacks Consensus revenue estimate stands at $471 million. For fiscal 2012, Hologic still expects to report revenues of $1.9−$1.925 billion (growth of 6−8%) while the adjusted EPS guidance was raised by a penny at both ends to $1.36−$1.38.

Recommendation

Offering 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. We are encouraged by the recent product approvals, which should help the company in recording higher sales going forward.

However, the company continues to be affected by lower visits to physicians due to the prevailing economic uncertainty. The growth reflected in the company’s guidance is primarily based on the acquisitions made in 2011. Hologic also witnesses tough competition from players like Qiagen (QGEN) and Conceptus (CPTS), among others. The stock retains a Zacks #3 Rank (“Hold”) in the short term. Over the long term, we are Neutral on Hologic.

 
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