Hologic (HOLX) Up 2% in One Week: Is It Time to Consider a Buy? - July 4, 2024

Hologic‘s (HOLX – Free Report investors are enjoying short-term gains in the stock lately. Shares of the Massachusetts-based women’s health company rose 2.5% last week, outperforming the sector’s 0.7% gain. At the same time, they outpaced the sector’s 0.3% gain and 0.8% decline, respectively, and the S&P 500.

HOLX One Week Price Comparison

Image Source: Zacks Investment Research

On Wednesday, Hologic closed the trading session 0.3% above its nine-day moving average, suggesting signs of a positive long-term trend.

HOLX shares trade above 9-day moving average

Image Source: Zacks Investment Research

Moreover, since the beginning of the year, the stock’s performance has remained positive compared to its peers such as Becton, Dickinson and Company (BDX – Free report) and QIAGEN (QGEN – (Free Report), whose shares both fell 6% and 6.3% respectively.

Despite any major developments from the veteran MedTech player, the recent surge signals growing investor sentiment regarding the company’s upbeat outlook for fiscal 2024, followed by bullish consensus estimates.

HOLX forecasts fiscal 2024 adjusted EPS in the range of $4.02 to $4.12, with projected year-over-year growth of 1.5% to 4%. The Zacks Consensus Estimate for fiscal 2024 earnings is currently pegged at $4.08 per share, indicating a more than 3% improvement year-over-year.

Despite the many challenges facing the genomic research market, including labor-related complications, favorable estimates indicate that the positive market momentum could continue. The company offers a unique combination of diagnostic, breast health, and surgical products, each with multiple growth drivers promising robust growth potential.

This year, Hologic has focused on improving its margins, and progress is evident every quarter. Additionally, the stock appears well positioned to weather the current macroeconomic climate.

Strong fundamentals weigh in the balance

Nearly two months ago, CEO Steve MacMillan impressed investors by announcing that the molecular diagnostics business, excluding COVID-19 testing revenue, had jumped 10.7% despite a tough year. That growth reflects the success of expanding Panther’s installed base and adding new tests over the years. Hologic is well ahead of its long-term goal of growing 5% to 7% by 2025, with the Molecular franchise on track to surpass the 7% mark.

The success of new portfolio products, such as the Aptima BV and CV/TV tests on the Panther system, the new respiratory test range and Biotheranostics, are contributing significantly to the growth of the US Molecular Diagnostics business. In addition, the overseas performance of the Genius digital cytology system is an excellent indicator of the product’s strong potential in the US markets, where it obtained FDA approval in early February.

The company’s breast health product portfolio now spans the entire spectrum of care, from imaging to biopsy to surgical procedures. As a leader in 3D mammography solutions, the company also stands to benefit from the United States Preventive Services Task Force’s (USPSTC) recent recommendations to begin breast cancer screenings at age 40 instead of age 50.

In surgery, the portfolio has also seen promising growth in recent years, combining the company’s innovations with strategic acquisitions such as Bolder Surgical. Myosure and the associated Fluent fluid management system are both drivers of the division’s growth. At the same time, Hologic’s financial resilience ensures investments in key initiatives and strategic purchases, such as the recent $310 million agreement to acquire Endo-Magnetics LTD to expand its interventional breast surgery business.

New international expansion on the horizon

Despite international business growth of over 40% since 2019, management believes this is just the beginning. The company’s ability to capture untapped market opportunities and consistent execution have driven impressive growth outside of domestic markets. For example, global surgical sales increased 7.4% in the fiscal second quarter, reflecting continued market penetration and the benefits of the direct sales strategy in the Nordics.

Hologic is not only looking to expand into new countries, but also into established markets and product categories. Backed by comprehensive, reliable data and strategic alliances, the company sees promising opportunities for long-term success in Europe and growing markets such as Asia Pacific.

Stock trading is cheaper than its peers

With a Value score of B, the company’s 12-month forward P/E of 16.9X is below the industry average of 32.2X and its five-year median of 33.1X.

Twelve-month forward price-to-earnings ratio (F12M)

Image Source: Zacks Investment Research

Movement estimation

Hologic’s earnings estimates for fiscal 2024 have remained constant at $4.08 over the past 30 days.

Image Source: Zacks Investment Research

Our latest take

There is no denying that Hologic is in a favorable position in terms of core business strength, earnings prowess, financial strength, and global opportunities. The Zacks Rank #2 (Buy) stock’s solid core growth prospects, along with its attractive valuation, provide a good reason for existing investors to hold on to the stock for potential future gains. For those considering adding new stocks to their portfolio, the cheap valuation provides a good entry point right now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.