Hologic Quarterly Profit Triples On Covid-19 Test Sales; Shares Rise

Hologic saw its quarterly earnings more than triple bolstered by strong demand for its COVID-19 tests, sending shares up 2.4% in Thursday’s pre-market trading session. 

Hologic (HOLX) earned an adjusted  $2.07 per diluted share in the fiscal fourth quarter ended Sept. 26, up from 65 cents in the year-ago period, and beating analysts’ estimates by 88 cents. Sales jumped 56% to $1.35 billion from a year ago, exceeding the Street consensus of $1.12 billion.

Global molecular diagnostics revenue surged 370.8% in constant currency to $818.9 million, far exceeding expectations and fueled by increased production and strong demand for the company’s two SARS-CoV-2 assays.

“These results were driven by the tireless efforts of our Diagnostics, European and supply chain teams to provide COVID-19 tests, and by steady improvement in our other businesses compared to the June quarter,” Hologic CEO Steve MacMillan commented. 

Looking ahead, Hologic guided for fiscal first-quarter to land between $1.35 billion and $1.425 billion and adjusted EPS to land between $2.10 and $2.25.

“We expect our strong financial performance to continue in the first quarter of fiscal 2021, driven by our COVID tests and continued recovery of our other businesses,” said Karleen Oberton, Hologic’s CFO.

Shares in Hologic are up a stellar 41% year-to-date, and the stock scores a Strong Buy Street consensus backed by 3 recent Buy ratings. That’s with an average analyst price target of $81 indicating 9.8% upside potential over the coming year.

Following the earnings results, BTIG analyst Ryan Zimmerman reiterated his Buy rating on Hologic with an $84 price target (14% upside potential).

“Demand continues to outpace supply for COVID tests (of which HOLX is now selling ~2M tests per week), pricing remains stable, and the likelihood that FY1Q21 grows Q/Q in COVID testing is high as weekly testing rates continue to increase (Oct. testing was up 31% vs. Sep., per the COVID Tracking Project) and committed rev. within Europe continues to increase,” Zimmerman wrote in a note to investors. “Still the question remains, what is the durability of COVID testing rev. beyond FY21 and are investors willing to reward HOLX shares for the boon in sales.”

The analyst noted that “ if investors are not willing to give credit to HOLX for the FCF generated from COVID sales, mgmt. is willing to go out and get it themselves through growth accretive M&A (HOLX suggested 1-2 deals in FY21) and share buybacks.” (See Hologic stock analysis)

“Over the long term, we view international growth, R&D/new product launches, further margin expansion and consistent capital allocation as reasons to own HOLX,” he concluded.

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