Hologic Inc.’s (HOLX) first quarter fiscal 2010 (ended Dec 26, 2009) earnings of 29 cents per share (excluding special items) were above the Zacks Consensus Estimate of 26 cents. The company had earned 31 cents in the year-ago quarter (ended Dec 27, 2008). Hologic reported net income of $74.6 million (excluding special items), compared to a net income of $80.7 million a year earlier.
Estimate Revisions Trend
Only one out of the seventeen analysts following the stock lowered earnings estimates for fiscal 2010. Similarly one analyst raised earnings estimates over the last 7 days. Over the last 30 days, only two of the seventeen analysts covering the stock increased estimates for full year 2010 while one of the analysts lowered earnings estimates. This implies that a majority of the analysts have not revised the earnings estimates for fiscal 2010.
Consequently, there is no clear directional pressure on the performance of the stock in the upcoming quarters. As a result, our short-term and long-term recommendations on the stock are Hold (Zacks Rank #3) and Neutral respectively. With respect to earnings surprises, the stock has provided positive surprises over the last four quarters. The four quarter average remained at 9.55%. This implies that Hologic has surpassed the Zacks Consensus Estimate by 9.55% over the last four quarters. The current Zacks Consensus Estimates for the second quarter and full-year 2010 are earnings of 29 cents and $1.18, respectively. The upside potential of these estimates, essentially a proxy for future earnings surprises, currently stands at 0% and 0.85% for the next quarter and full-year 2010, respectively.
Quarterly results
Revenues for the reported quarter came in at $412.4 million, as against $429.2 million in the year-ago quarter thus representing a 3.9% decline. The decrease was primarily due to the year-over-year decline in sales of Selenia full field digital mammography systems, attributable primarily to the current economic environment, which resulted in delays and reductions in hospital capital spending and longer sales cycles. This overall decline was partially offset by higher revenues from servicing the company’s installed mammogram systems and stronger sales of testing and gynecological surgery products.
The company operates in four segments Breast Health, Diagnostics, GYN (Gynecology) Surgical, and Skeletal Health. Breast health products include a broad portfolio of breast imaging and related products and accessories, including digital and film-based mammography systems, computer-aided detection (CAD), breast biopsy guidance systems, minimally invasive breast biopsy and tissue extraction devices and breast brachytherapy products. Diagnostics products include Hologic’s ThinPrep products, Rapid Fetal Fibronectin test, Cervista tests in addition to other Third Wave products. The segment for GYN surgical products includes Holgic’s NovaSure endometrial ablation system and Adiana permanent contraception system. The Skeletal Health segment includes the company’s osteoporosis assessment, mini C-arm, Extremity Magnetic Resonance Imaging (MRI) products, and General Radiography.
Breast Health revenues came in at $179.1 million, down 10% from $199.1 million recorded in the year-ago quarter. This decrease was primarily attributable to the slowdown in demand for the Selenia system. Diagnostic revenues for the quarter came in at $140.4 million, up 4.3%. Revenues from the GYN surgical segment came in at $71.4 million for the quarter and increased 5% compared to the year-ago quarter. Sales from the Skeletal Health segment came in at $21.5 million, compared to $27.5 million in the year-ago quarter.
Total costs and expenses in the reported quarter declined to $340.5 million from $335.5 million in the year-ago quarter. The decrease is attributable to the management’s constant efforts to reduce expenses. Research and development spend for the quarter came in at $23.2 million as against $23.8 million in the year-ago quarter. Selling and marketing expenses declined marginally to $64.6 million from $65 million in the prior year period. General and administrative expenses climbed to $42.6 million from $34.8 million.
During the quarter, the company repaid $54.6 million of the $540 million term loan borrowed in 2008 in connection with the acquisition of Third Wave. The company has repaid $443 million as of Feb 1, 2010.
Outlook for 2010 Raised
Management expects second quarter fiscal 2010 revenues between $410 million and $415 million and earnings of 29 cents per share. For the full year 2010, management raised their forecast. The company now expects to earn between $1.16 and $1.20 per share, up from the prior range of $1.15 to $1.19. Hologic expects to end fiscal 2010 with revenues between $1.640 billion and $1.665 billion, up from the prior range of $1.625 billion to $1.650 billion.
The improved forecast for fiscal 2010 had a positive impact on Hologic’s stock price. The announcement, made after the market closed on Feb 1, 2010, caused the shares to rise by over 3% in after market trading. Earlier, it had closed the day at $15.25.
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