Hologic Inc.’s (HOLX) second-quarter earnings of 29 cents per share, excluding special items, was in-line with the Zacks Consensus Estimate. However, quarterly earnings was flat compared to last year’s figure.
 
On a reported basis, Hologic earned 8 cents per share in the quarter as against a loss of $9.01 per share in the year-ago quarter, when it had a hefty write-down of assets in connection with an acquisition and other items.
 
Revenues for the reported quarter climbed 4% year over year to $418.1 million. The increase was driven by a year-over-year growth across most segments of the company. The company operates in four segments: Breast Health, Diagnostics, GYN (Gynecology) Surgical, and Skeletal Health.
 
Breast Health revenues for the reported quarter climbed 5.2% year over year to $189.5 million. The improved showing by the segment was primarily attributable to the rise in revenue from the service related to Hologic’s increased installed base of Selenia full field digital mammography systems. The new 2D/3D Selenia Dimensions product and the Eviva breast biopsy offering also drove growth in the reported quarter.
 
Diagnostic revenues for the reported quarter climbed 3.7% year over year to $140 million. The increased revenues from the Cervista and ThinPrep pap tests sold internationally resulted in the impressive showing by the segment in the second quarter of fiscal 2010.
 
Revenues from the GYN surgical segment came in at $67.1 million for the quarter and increased 5.2% compared to the year-ago quarter. Sales from the Skeletal Health segment came in at $21.5 million, compared to $23.1 million in the year-ago quarter.
 
Research and development spend in the reported quarter came in at $25.3 million as against $24.4 million in the year-ago quarter. Selling and marketing expenses climbed 5.1% year over year to $61.5 million in the reported quarter. General and administrative expenses were flat year over year at $38.7 million.
 
During the quarter, the company repaid $72.5 million of the $540 million term loan availed in 2008 in connection with the acquisition of Third Wave. The company repaid $420.5 million as of Dec 31, 2009. The remaining $47 million was repaid in April 2010. The total backlog for all products stood at $296.8 million at the end of the reported quarter
 
Outlook
 
Management expects third quarter fiscal 2010 revenues between $415 million and $420 million and earnings of 29 cents per share. The earnings guidance for the third quarter fiscal 2010 is in line with the Zacks Consensus Estimate.
 
For the full year 2010, management reaffirmed its earlier forecast. The company expects to earn between $1.16 per share and $1.20 per share (excluding special items). Hologic expects to end fiscal 2010 with revenues between $1.640 billion and $1.665 billion.
 
Our Recommendation
 
Currently, we are Neutral on Hologic. This implies that the stock is expected to perform in line with the overall U.S. equity market over the next 6−12 months. Consequently, we advise investors to retain the stock over the time period.
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