Here's Why You Should Invest in Hologic (HOLX) Stock Now
Hologic, Inc. HOLX is gaining from the continued strength of the GYN Surgical and Breast Health businesses. The company’s earnings and revenues in the first quarter of fiscal 2023 beat the Zacks Consensus Estimate. However, stiff competition and currency headwinds do not bode well.
In the past year, this Zacks Rank #2 (Buy) stock has increased 12.4% compared with the 14.8% fall of the industry and the 9.5% fall of the S&P 500.
The renowned medical device company has a market capitalization of $19.63 billion. Its earnings in the first quarter of fiscal 2023 surpassed the Zacks Consensus Estimate by 18.9%. Hologic’s long-term expected growth is estimated at 15.2% compared with the industry’s growth expectation of 16.4%.
Let’s delve deeper.
Factors at Play
Q1 Upsides: Hologic delivered better-than-expected earnings and revenues for the first quarter of fiscal 2023. Excluding COVID-related business, Diagnostics grew 15.8% organically, powered by 24.5% growth in Molecular Diagnostics. Surgical also delivered an impressive quarter growing 14.7% organically. While the extra days contributed approximately 250 basis points of net growth, even without the extra days, Diagnostics and Surgical both grew double digits and Breast Health exceeded prior guidance. Hologic is currently well positioned to achieve its full-year guidance of low double-digit organic growth ex-COVID in all three franchises, well above the 5-7% long-term growth rate.
Strength in Breast Health: Hologic has been making impressive progress in its Breast Health arm recently. The company is currently focusing on expanding its strategy to diversify the business across the patient continuum of care. It has also launched new software products based on its investments in artificial intelligence and has strengthened its interventional franchise via the Brevera relaunch.
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Even though supply-chain challenges persist, demand for the company’s best-in-class Breast Health products remained strong during the first quarter of fiscal 2023. The company anticipates chip supply chain shortage to recover throughout fiscal 2023 and into 2024.
Strength in GYN Surgical: Over the past few years, the GYN Surgical business has transformed to the most profitable division of Hologic on a percentage basis, banking on new leadership, strong strategic execution of new commercial models and new product launches.
Revenues at the GYN Surgical business rose 14.7% year over year organically. These results underscore a more diverse surgical business with more growth drivers than in the past. In addition to strong performance from MyoSure and better-than-expected results from NovaSure, the quarter showcased increasing contributions from Fluent and the company’s laparoscopic portfolio of Asessa and Boulder. Through Acessa and Bolder acquisitions, the company integrated Acessa’s procedure and the Bolder’s advanced vessel sealing portfolio into its product line.
Downsides
Foreign Exchange Headwinds: We remain worried about the significant challenges Hologic faced owing to unfavorable foreign currency impact that adversely affected the company’s overall performance in the past few quarters.
Competitive Landscape: Hologic operates in a highly competitive industry. Its mammography, related products and subsystems compete on a worldwide basis with products offered by several competitors, including General Electric Company (GE), Siemens, Koninklijke Philips NV, or Philips, Planmed Oy, or Planmed, Agfa-Gevaert N.V., or Agfa, Carestream Health, Inc., FUJIFILM Holdings Corporation, or Fuji, I.M.S., and Toshiba Corporation.
Estimate Trend
In the past 90 days, the Zacks Consensus Estimate for Hologic’s fiscal 2023 earnings has been moved 8.1% north at $3.74.
The Zacks Consensus Estimate for its fiscal 2023 revenues is pegged at $3.97 billion, suggesting an 18.4% fall from the year-ago reported number.
Key Picks
Few other top-ranked stocks in the overall healthcare sector include Haemonetics Corporation HAE, TerrAscend Corp. TRSSF and Akerna Corp. KERN . Haemonetics and TerrAscend both sport a Zacks Rank #1, while Akerna carries a Zack Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Haemonetics’ stock has risen 42.1% in the past year. Earnings Estimates for Haemonetics have increased from $2.87 per share to 2.91 for 2023, and from $3.02 per share to $3.28 for 2024 in the past 30 days.
HAE’s earnings beat estimates in each of the last four quarters, delivering an average surprise of 10.98%. In the last reported quarter, it reported an earnings surprise of 7.59%.
Estimates for TerrAscend in 2023 have remained constant at a loss of 10 cents per share in the past 30 days. Shares of TerrAscend have declined 70.6% in the past year.
TerrAscend’s earnings beat estimates in one of the last three quarters and missed the mark in the other two, the average negative surprise being 136.11%. In the last reported quarter, TRSSF delivered an earnings surprise of 216.67%.
Akerna’s stock declined 95.7% in the past year. Its estimates for 2023 have remained constant at a loss of $1.91 per share over the past 30 days.
Akerna missed earnings estimates in each of the last four quarters, delivering a negative earnings surprise of 15.49%, on average. In the last reported quarter, KERN delivered a negative earnings surprise of 13.33%.
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