Shares of Hologic (NASDAQ:HOLX), Inc. HOLX reached a new 52-week high of $81.80 on Jan 8, before closing the session marginally lower at $80.49.
The company’s shares have charted a solid trajectory in recent times, appreciating 52.1% over the past year, ahead of 27.6% growth of the industry it belongs to and 18.3% surge of the Zacks S&P 500 composite.
In fact, Hologic’s shares significantly gained post its first-quarter fiscal 2021 preliminary results announcement on Jan 8. Hologic is also gaining from a slew of recently completed acquisitions. Further, recent regulatory approvals also buoy optimism. However, downsides may result from a stiff competitive landscape and foreign exchange headwinds.
Let's delve deeper.
Impressive Q1 Fiscal 2021 Results
Hologic’s recently released preliminary results for its fiscal 2021 first quarter instill investors’ confidence in the stock. The company’s projection of a reported revenue growth of 89.3% (86.5% at constant exchange rate) looks impressive. Further, organic revenues (or revenues excluding divestitures and the Acessa acquisition) are projected at a stupendous level of 104%, further buoying optimism on the stock.
Other Growth Drivers
Acquisitions: Hologic has, of late, been gaining from a slew of buyouts. The recently completed acquisition of SOMATEX Medical Technologies GmbH, a well-known name in the biopsy site markers and localization technologies space, looks encouraging. Hologic also announced its plans to acquire Biotheranostics, Inc., a privately held commercial-stage company providing molecular diagnostic tests for breast and metastatic cancer. These buyouts are expected to significantly boost Hologic’s business across the globe.
Regulatory Approvals: Investors are upbeat about Hologic’s recent regulatory clearances. The company received the FDA’s approval for its Genius AI Detection technology in December 2020. In November 2020, Hologic received the FDA’s approval for its diagnostic claim for its HIV-1 (human immunodeficiency virus type 1) viral load monitoring assay. The same month, the company received the CE Mark for its new Genius Digital Diagnostics System.
In October 2020, Hologic announced the amendment of the FDA’s Emergency Use Authorization that was initially received for its Aptima SARS-CoV-2 assay (that runs on the company’s fully automated Panther system) in May.
Downsides
Tough Competition: Hologic operates in a highly competitive industry, which includes giants like Siemens. The FDA’s decision to re-classify FFDM devices to class II from class III makes it easier for all medical devices companies to introduce similar products in the market. Subsequently, the approval process for class II devices will require 510(k) clearance rather than the lengthy premarket approval application. This will enable easier approval in the United States, thus intensifying competition among medical device companies.
Foreign Exchange Headwinds: Hologic faces significant business challenges owing to unfavorable foreign currency impacts. This persistent issue has been adversely affecting the company’s overall performance over the past few quarters.
Zacks Rank & Other Key Picks
Currently, Hologic sports a Zacks Rank #1 (Strong Buy).
A few other top-ranked stocks from the broader medical space are Amedisys (NASDAQ:AMED), Inc. AMED, IDEXX Laboratories, Inc. IDXX and Patterson Companies (NASDAQ:PDCO), Inc. PDCO.
Amedisys’ long-term earnings growth rate is estimated at 14.8%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
IDEXX’s long-term earnings growth rate is estimated at 15.8%. It currently carries a Zacks Rank #2.
Patterson’s long-term earnings growth rate is estimated at 11.1%. The company presently carries a Zacks Rank #2.
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