Hologic Beats, Raises Guidance – Analyst Blog

Hologic (HOLX) reported an EPS of 10 cents in the third quarter of fiscal 2010 compared with the year-ago quarter’s 12 cents. However, after adjusting for certain items, EPS was 30 cents, a penny above both the Zacks Consensus Estimate and the year-ago quarter’s adjusted EPS.

Revenues were $420.7 million, an increase of 4.4% compared to the third quarter of fiscal 2009 and marginally higher than the Zacks Consensus Estimate of $418 million.

Hologic operates in four segments − Breast Health, Diagnostics, GYN (Gynecology) Surgical, and Skeletal Health which contributed 45%, 33%, 17% and 5% respectively to the total revenue during the quarter. While Breast Health and GYN Surgical increased 8.3% ($189.3 million) and 8.7% ($71.6 million), respectively, revenues from Diagnostics and Skeletal Health declined 1.5% ($137.4 million) and 2.1% ($22.4 million), respectively.

The robust growth witnessed by Breast Health was primarily driven by the rise in revenue from the services related to Hologic’s increased installed base of Selenia full field digital mammography systems and the new 2D/3D Selenia Dimensions product, to a lesser extent. This was partially offset by closure of some operations in Shanghai.

Moreover, Diagnostics revenue declined due to a reduction in ThinPrep pap tests volume resulting from reduced patient visits caused by economic uncertainty and changes in cervical cancer screening guidelines. However, increased revenues from Cervista tests and Third Wave product lines provided some cushion to the decline.

The increased revenues from the Cervista and ThinPrep pap tests sold internationally resulted in the impressive performance by the segment in the second quarter of fiscal 2010.

In July 2010, Hologic decided to acquire Canada-based privately owned Sentinelle Medical for $85 million. The deal, expected to be completed in August, is subject to approvals. Hologic expects this acquisition to be neutral to fiscal 2011earnings. The acquisition of Sentinelle, a leading provider of Magnetic Resonance Imaging (MRI) breast coils, tables and visualization software, should enable Hologic to further strengthen its position in the women’s health care market.

Hologic also provided an update on its Selenia Dimensions 3-D digital breast tomosynthesis system. The product is scheduled to be reviewed by the Radiological Devices Panel of the US food and Drug Administration (FDA) on September 24, 2010.

Subsequent to the release of third quarter results, Hologic provided its guidance for the fourth quarter and raised fiscal 2010 guidance. In the fourth quarter, revenue is expected in the range of $415-$420 million with adjusted EPS of 30 cents. The Zacks Consensus Estimate of 31 cents is higher than company guidance.

For fiscal 2010, Hologic expects revenues of $1.66-$1.67 billion (earlier guidance $1.64-$1.66 billion) and adjusted EPS of $1.17. The revised revenue guidance considers flat to slightly increased GYN Surgical revenues and flat to slightly decreased Diagnostics revenues.

We are currently Neutral on the stock.