Hologic (Photo credit: Wikipedia)
HOLX : NASDAQ : US$20.66
BUY
Target: US$26.00
COMPANY DESCRIPTION:
Hologic is a women’s health company that offers medical imaging, diagnostic and therapeutic products to hospitals, imaging clinics, private practices, and labs through a 625-rep direct sales force as well as select independent distributors. The company develops and markets products that address a range of women’s health concerns, including breast cancer, cervical cancer, menorrhagia, osteoporosis and preterm birth and others.
Investment recommendation
HOLX missed FQ2/13 results on the top line and lowered its FY/13 outlook on the top and the bottom. Despite the miss, we see favorable risk-reward in HOLX shares LT, driven by better-than-expected synergies with respect to the GPRO integration, looming conversion to higher price 3D tomo from 2D, and deleveraging of the balance sheet.
Investment highlights
2Q results. HOLX beat our EPS estimate by 2 cents but missed on revenue by $16M; and more importantly lowered its outlook for F3Q and FY’13.
Revenue shortfall. The ~$18M revenue shortfall from the midpoint of guidance resulted from ThinPrep restructuring in China ($8M impact);
U.S. ThinPrep utilization softness ($4M); and tight capital spending budgets ($6M) for 2D.
GPRO update. The GenProbe Dx business grew 6% pro forma, below our expectations, driven by Women’s Health MDx (+10%) partially offset by
2% growth in blood screening.
Guidance/model. HOLX lowered FY’13 rev. guidance by $85M at the midpoint to $2,530M – $2,550M from $2,610M – $2,640B, and FY’13 Adj.
EPS by $0.04 at the midpoint to $1.54-1.56 from $1.58-1.60. We lower our FY’13 revenue estimate to $2,541M from $2,630M and FY’13E EPS to
$1.54 from $1.58. We lowered FY’14E revs to $2,662M from $2,801M and FY’14E Adj. EPS to $1.65 from $1.77.
Valuation
Our $26 price target assumes a 16.8x multiple on our C2013E EPS of
$1.55.
