Can Molecular Diagnostics Drive Hologic's (HOLX) Q4 Earnings?

Hologic, Inc. (NASDAQ:HOLX) is slated to report fourth-quarter fiscal 2017 financial results on Nov 8, after the closing bell. Last quarter, the company delivered a positive earnings surprise of 2%. Notably, Hologic’s earnings surpassed the Zacks Consensus Estimate in all of the past four quarters, the average beat being 4.2%.

Let’s see how things are shaping up prior to this announcement.

Key Catalyst

Similar to last quarter, Hologic is expected to see a stellar performance by its Molecular Diagnostics business. In the United States, the company is expected to gain from increasing market share and utilization of fully automated Panther system along with market expansion by conforming to testing guidelines.

Notably, Hologic recently received FDA approval to market the AptimaHerpes Simplex Virus 1 & 2 molecular assay on the Panther system. The company believes this approval will draw customers apart from broadening the Panther women health menu.

Internationally, Molecular Diagnostics results were strong in the last-reported quarter, courtesy of benefits of a new leadership, healthy Panther placements and multiple product introductions, including viral load assays. Meanwhile, we are upbeat about the company’s receipt of European CE Mark for its new Panther Fusion system and Panther Fusion assays for flu and respiratory testing in June. The company also received CE Mark for Aptima Combo 2 Assay for Chlamydia trachomatis and Neisseria gonorrhoeae in the same month. These developments should boost Molecular Diagnostics revenues in the to-be-reported quarter.

Hologic, Inc. Price and EPS Surprise

Hologic, Inc. Price and EPS Surprise | Hologic, Inc. Quote

The Zacks Consensus Estimate for Molecular Diagnostics revenues of $146 million reflects an increase of 8.9% from the year-ago quarter and 1.4% sequentially.

Here are the other factors that might influence Hologic’s fourth-quarter results:

Hologic is hopeful about sustaining a solid earnings trend in 2017 on the back of gains from the GYN Surgical segment. Strong global sales of MyoSure have been driving the top line at this segment. Given the huge market potential of Myosure, we expect the company to maintain the bullish trend. The Zacks Consensus Estimate for GYN Surgical revenues of $107 million reflects an increase of 4.9% from the year-ago quarter. Also, the Zacks Consensus Estimate for MyoSure revenues of $51 million reflects an increase of 19.7% from the year-ago quarter.

The company is also positioned to rake in significant benefits in the fourth quarter from the integration of Cynosure, a medical aesthetics systems and technologies company, which was acquired by Hologic in March 2017. The. FDA recently granted an expanded clearance for Cynosure’s non-invasive body contouring product, SculpSure, to treat the submental area. This approval marked SculpSure’s sixth cleared body treatment area.

For fourth-quarter fiscal 2017, Hologic expects revenues of $785-$800 million, representing annualized growth of 8-10.1%. The current Zacks Consensus Estimate for fourth-quarter revenues of $793 million is within the projected range and reflects an increase of 9.1% from the year-ago quarter.

Adjusted EPS is projected at 48-50 cents, showing an annualized decline of 7.2-3.4%. However, the current Zacks Consensus Estimate for fourth-quarter adjusted EPS of 49 cents reflects a decline of 5.8% from the year-ago quarter.

On the flip side, Hologic’s blood screening divestiture is expected to impede the company’s growth momentum. We expect this to get reflected in the company’s financial performance in the to-be-reported quarter.

Hologic also had to face challenges related to unfavorable foreign currency over the past few quarters. Escalating operating expenses and intense competition, particularly in the tomosynthesis market, continue to concern.

Here is what our quantitative model predicts:

Our proven model does not conclusively show that Hologic is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: Hologic has an Earnings ESP of +0.37%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

QIAGEN N.V. (NASDAQ:QGEN) has an Earnings ESP of +1.63% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Henry Schein, Inc. (NASDAQ:HSIC) has an Earnings ESP of +1.00% and a Zacks Rank #3.

Penumbra, Inc. (NYSE:PEN) has an Earnings ESP of +31.82% and a Zacks Rank #3.

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