Hologic (HOLX) reported an adjusted EPS of 32 cents during the third quarter of fiscal 2011, in line with the Zacks Consensus Estimate and 2 cents above the year-ago quarter. Revenues were $451.1 million, an increase of 7.2% compared to the prior-year quarter and higher than the Zacks Consensus Estimate of $447 million.
Hologic operates through four segments − Breast Health, Diagnostics, GYN (Gynecology) Surgical and Skeletal Health − contributed 45%, 32%, 18% and 5%, respectively to the total revenue during the quarter. These segments recorded a robust growth of 8.4% ($205.2 million), 4.4% ($143.4 million), 10.9% ($79.4 million) and 3.2% ($23.1 million), respectively.
The growth witnessed by Breast Health was primarily driven by the rise in revenue from services rendered 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. Product revenue growth was also driven by a shift in sales from Selenia to Dimensions.
For the last few quarters, Diagnostic segment had been recording lower sales; hence, the reported quarter growth comes as a relief. Growth in this segment was driven by increased revenues from Cervista tests and higher ThinPrep volume.
The increase in GYN Surgical revenues was primarily due to inclusion of MyoSure revenues and growth in sales of both Adiana and NovaSure products. The increase in Skeletal Health revenues was driven by higher sales of bone densitometry units.
Over the past few quarters, Hologic has taken both organic and inorganic route for growth. Earlier this year, the company acquired Interlace Medical that develops MyoSure hysteroscopic tissue removal system. Subsequently, the company is expanding its presence in China with the acquisition of TCT International (a distributor of medical products) and Beijing Healthcome Technology Company (a manufacturer of mammography systems).
Guidance
Hologic provided its guidance for the fourth quarter of fiscal 2011 and raised fiscal 2011 outlook. In the fourth quarter, the company expects to report $455−$460 million of revenues (representing annualized growth of 6−7%) resulting in adjusted EPS of 32−33 cents. The Zacks Consensus EPS Estimate of 33 cents is within the company’s guidance, while revenue outlook of $454 million lies at the lower end of the company’s range.
For fiscal 2011, Hologic raised its outlook for revenue based on the acquisition of TCT International. The company expects to report revenues of $1.77−$1.78 billion (previous guidance: $1.76−$1.77 billion) while adjusted EPS guidance remains unchanged at $1.24−$1.26.
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.
