Breast Health Sales to Aid Hologic's (HOLX) Q3 Earnings

Zacks Equity Research

July 26, 2021 at 7:00 AM·5 min read

While Hologic, Inc.’s HOLX diagnostic arm continues to face industry-wide challenges of declining COVID-19 test sales, its Breast Health arm has been witnessing a faster-than-expected return to growth on the company’s efforts to diversify the business across the patient continuum of care.

We anticipate the company’s third-quarter fiscal 2021 results, scheduled for release on Jul 28 after the closing bell, to duly reflect these attributes.

Click here to know how the company’s overall second-quarter performance is expected to be.

Breast Health

Management, during the fiscal second-quarter earnings call, observed that the Breast Health arm has been witnessing a faster-than-expected return to growth despite the pandemic-led challenging business climate. We are optimistic about an improvement in sequential performance by the segment during the fiscal third quarter on the recent launches within the segment and the acquisition of Biotheranostics.

The company, in February, completed the acquisition of Biotheranostics -- a leader in molecular tests for breast and metastatic cancers -- enabling the company to expand into the adjacent growth market of oncology. In May 2021, Hologic announced that its subsidiary, Biotheranostics, has received broader Medicare coverage for its Breast Cancer Index test under an expanded Medicare Local Coverage Determination. Hologic, during the last-quarter earnings update, noted that the Biotheranostics business is witnessing a very strong start based mainly on the inclusion of the breast cancer index test in NCCN guidelines to predict the benefit of extended treatment within different therapies. The developments are expected to have contributed to revenue growth within the Breast Health segment in the third-quarter of fiscal 2021.

Hologic, Inc. Price and EPS Surprise

Hologic, Inc. price-eps-surprise | Hologic, Inc. Quote

Further, Hologic, during fiscal second-quarter earnings call, announced the launch of new software products based on investments in artificial intelligence. Recently, the company strengthened the interventional franchise by relaunching Brevera and buying Somatex -- a long time partner and leading developer of breast cancer markers. These developments are expected to have contributed to the company’s Breast Health business in the to-be reported quarter.

The Zacks Consensus Estimate for Breast Health’s revenues is pegged at $335 million, suggesting a rise of 49.6% from the year-ago quarter’s reported figure.

Diagnostics

During the second-quarter earnings update, Hologic noted that demand for its COVID-19 testing line is highly uncertain as the company has been witnessing declining sales of COVID-19 tests in the United States, following the mass vaccine rollout. However, excluding COVID -19 testing, Hologic’s base molecular business continued to grow as customers capitalize on the wide assay menu and the strength of Panther's best-in-class automation.

In June 2021, Hologic acquired Mobidiag Oy (a privately-held commercial-stage Finnish-French developer of innovative molecular diagnostic tests and instrumentation) which strengthens Hologic’s international and diagnostics businesses by enabling it to expand into the large and fast-growing acute care adjacency. We expect this major development to have contributed significantly to the company’s third-quarter revenue growth.

Hologic’s March 2021 buyout -- Diagenode -- is expected to have contributed significantly to the its third-quarter revenue growth by enabling Hologic to offer a broader and differentiated menu of molecular diagnostic tests on the fully automated, high throughput Panther Fusion instrument.

In June 2021, Hologic received CE Mark approval for its new Aptima CMV Quant assay in Europe. Intended to help in the diagnosis and management of solid-organ transplant patients and hematopoietic stem cell transplant patients, the assay is expected to have seen greater market adoption through the fiscal third quarter, thus boosting revenues.

The Zacks Consensus Estimate for total Diagnostics revenues is pegged at $560 million, suggesting a rise of 5.3% from the year-ago quarter’s reported figure.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has higher chances of beating estimates. However, this is not the case here as you can see:

Earnings ESP: Hologic has an Earnings ESP of -0.12%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).

Stocks Worth a Look

Here are a few medical stocks worth considering as these have the right combination of elements to beat on earnings this reporting cycle.

Hill-Rom Holdings, Inc. HRC has an Earnings ESP of +0.56% and a Zacks Rank #2, currently. The stock is slated to release third-quarter fiscal 2021 results on Jul 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Henry Schein, Inc. HSIC has an Earnings ESP of +0.91% and a Zacks Rank of 2, at present. The stock is expected to release second-quarter 2021 results on Aug 3.

Laboratory Corporation of America Holdings LH has an Earnings ESP of +6.53% and a Zacks Rank of 2, at present. The company is scheduled to release second-quarter 2021 results on Jul 29.

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Laboratory Corporation of America Holdings (LH) : Free Stock Analysis Report

Hologic, Inc. (HOLX) : Free Stock Analysis Report

Henry Schein, Inc. (HSIC) : Free Stock Analysis Report

HillRom Holdings, Inc. (HRC) : Free Stock Analysis Report

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