Hologic, Inc. HOLX reported third-quarter fiscal 2021 adjusted earnings per share (EPS) of $1.33, up 77.3% year over year. The bottom line surpassed the Zacks Consensus Estimate by 19.8%.

The adjustments include charges and benefits related to amortization of acquired intangible assets, MDR expenses, and restructuring and integration/consolidation costs, to name a few.

The company’s GAAP EPS was $1.04 in the quarter compared with the year-ago EPS of 53 cents, reflecting a stupendous 96.2% improvement.

Revenues in Detail

Revenues grossed $1.17 billion in the reported quarter, up 41.9% year over year (up 37.8% at constant exchange rate or CER). The metric surpassed the Zacks Consensus Estimate by 12.9%.

Organic revenues (excluding divested Blood business and buyouts of Acessa, Biotheranostics Diagenode and Mobidiag) of $1.13 billion increased 38.4% year over year and 34.2% at CER.

Hologic, Inc. Price, Consensus and EPS Surprise

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

U.S. revenues of $749.9 million rose 13.5%, whereas international revenues of $418.4 million improved 158.1% year over year or 137% at CER.

Organically, revenues in the United States rose 10.1% year over year to $719 million in the quarter. International revenues increased 152.5% year over year (up 131.4% at CER) to $409.3 million.

Segments in Detail

Revenues at the Diagnostics segment rose 25% year over year (up 20.3% at CER) to $665.5 million in the quarter under review, with Cytology & Perinatal being the major growth driver. Cytology & Perinatal revenues of $115.9 million climbed 75% at CER. Molecular Diagnostics’ revenues of $536.4 million rose 11.9% at CER. Blood Screening revenues of $13.2 million rose 69.2% year over year at CER.

Revenues at the Breast Health segment improved 55.8% from the year-ago period (up 53.2% at CER) to $349 million. This primarily resulted from a robust product portfolio and strong demand for Brevera following its relaunch. Impressive performances by the segment’s Breast Imaging and interventional businesses also drove the top line.

Domestic sales in this segment improved in the quarter on a 60.2% revenue uptick year over year. Further, outside the United States, Breast Health sales improved 31.1% at CER.

Revenues at the GYN Surgical business rose 148.4% year over year (up 143.4% at CER) to $127.9 million, while revenues at Skeletal Health increased 70.4% year over year (up 66.3% at CER) to $25.9 million.

Operational Update

In the fiscal third quarter, the company-provided adjusted gross margin expanded 140 basis points (bps) to 66.1%. According to the company, the increase in gross margin was largely due to recovery in base businesses.

Adjusted operating expenses, as stated by the company, amounted to $310.1 million, up 18.8% year over year. The company-reported adjusted operating margin expanded 650 bps to 39.5%.

Financial Update

Hologic ended fiscal third-quarter 2021 with cash and cash equivalents of $827.6 million compared with $816.4 million at the end of second-quarter fiscal 2021. Total long-term debt (including current portion) was $2.65 billion at the end of the third quarter of fiscal 2021 compared with $2.71 billion at the end of the second quarter of fiscal 2021.

Cumulative net cash provided by operating activities at the end of third-quarter fiscal 2021 was $1.87 billion compared with $454.6 million a year ago.

Guidance

Hologic has provided the financial guidance for fourth-quarter fiscal 2021 projecting strong growth in its base business, more than offset by declines in COVID-19 testing revenues.

The company projects revenues within $1-$1.04 billion implying a year-over-year decline in the range of 25.8-22.8% on a reported basis, 26.7-23.8% at CER and 29.6-26.6% organically. The Zacks Consensus Estimate for fourth-quarter fiscal 2021 revenues is pegged at $1.03 billion.

Adjusted EPS for the quarter is estimated within 92 cents-$1, with projected decline of 55.6-51.7% year over year. The Zacks Consensus Estimate for fourth-quarter fiscal 2021 EPS is pegged at $1.11.

Our Take

Hologic exited the fiscal third quarter with better-than-expected results. The robust bottom- and top-line growth amid pandemic-led business disruptions is encouraging. Rise in organic revenues is impressive as well. Diagnostic revenues, led by growth in Cytology & Perinatal revenues along with improvement in Blood Screening revenues, buoy optimism. The recently-completed buyouts of Diagenode, Biotheranostics and SOMATEX Medical Technologies bode well for the company. Expansion of both margins looks encouraging. The company projects growth in base business revenues in the fourth quarter.

However, COVID-19 assay sales in the U.S. testing market continue to decline. The company expects this trend to continue as more people are getting vaccinated. In addition, summer vacations may further reduce demand domestically and in Europe. This leads to uncertainty in Hologic's future sales of COVID-19 tests, raising apprehension. The fiscal fourth-quarter guidance with projection of significant year-over-year decline in earnings and total revenues concerns us.

Zacks Rank and Stocks to Consider

Hologic currently carries a Zacks Rank #4 (Sell).

Some better-ranked medical stocks, which are expected to report earnings soon, are AMN Healthcare Services Inc AMN, Catalent, Inc. CTLT and West Pharmaceutical Services, Inc. WST.

The Zacks Consensus Estimate for AMN Healthcare’s second-quarter 2021 adjusted EPS is currently pegged at $1.47. The consensus estimate for second-quarter revenues stands at $829.4 million. The company currently carries a Zacks Rank #2 (Buy).

Catalent currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its fourth-quarter fiscal 2021 adjusted EPS is currently pegged at $1.04. The consensus estimate for fourth-quarter revenues is pegged at $1.13 billion. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for West Pharmaceutical’s second-quarter 2021 adjusted EPS is currently pegged at $1.74. The consensus mark for its revenues stands at $665.6 million. The company carries a Zacks Rank #2.

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