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Hologic

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Hologic

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.



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