The announcement of Hologic 's ( HOLX ) first quarter of fiscal 2012 results as on January 30, 2012, has led analysts to increase their estimates over the long term. However, the current headwinds have forced the analysts to take a cautious stand for the next two quarters.

Previous Quarter Highlights

The company reported an adjusted EPS of 34 cents during the first quarter of fiscal 2012, a couple of cents above the Zacks Consensus Estimate and 4 cents above the year-ago figure. Revenues were $472.7 million, an increase of 9.3% year over year and higher than the Zacks Consensus Estimate of $466 million.

Hologic operates through four segments − Breast Health, Diagnostics, GYN (Gynecology) Surgical and Skeletal Health − each contributing a corresponding 46%, 33%, 16% and 5% to total revenue during the quarter. These segments recorded robust growth of 10.2% year over year (at $215.4 million), 10.8% ($154.1 million), 3.8% ($78.5 million) and 10.3% ($24.7 million), respectively.

Hologic provided guidance for the second quarter of fiscal 2012, which was more or less in line with the Zacks Consensus Estimate. For fiscal 2012, the company reiterated its revenue guidance at $1.9−$1.925 billion while the adjusted EPS guidance was raised by a penny at both ends to $1.36−$1.38.

For a full coverage on the earnings, read: Hologic Tops Estimates

Agreement of Analysts

With economic uncertainty resulting in lower visits to physicians, estimate revision trend is a bit on the negative side for the next two quarters. The growth reflected in the company's guidance is primarily based on the acquisitions made in 2011. Over the last 30 days, 3 of the 20 analysts covering the stock have lowered their estimates for the second quarter of fiscal 2012, with 2 revisions northward.

On the other hand, over the long term, optimism among the analysts at large emanates from recent product launches and a rebound in the GYN Surgical business.  As a result, 17 analysts have increased their estimates, for fiscal 2012, over the last 30 days with no negative revisions. The same positive trend can be seen for fiscal 2013 with 11 upward revisions and 3 moving in the opposite direction.

The long-term prospect looks encouraging based on a number of recent product approvals. These include approval from US Food and Drug Administration for the Cervista High Throughput Automation (HTA) system for HPV Screening. The company also received CE Mark approval for C-View synthesized 2D image reconstruction algorithm for 3D mammography exams and a nod in China for the Serenity digital mammography system.

Hologic derives more than 30% of its revenues from the Diagnostics business, which has been experiencing challenges over the recent past, especially in the US market (declining 2−3% annually). However, the situation seems to be improving gradually with slowly recovering volume and stable pricing. Besides, the company's new Dimensions 3D system is gaining traction and is expected to be an important growth driver for the Breast Health segment. The company is also confident of being able to achieve the target of placing 500-700 3D systems in the US within the first two years.

Magnitude of Estimate Revisions

Given few revision trends, the consensus estimate for the second quarter was static at 33 cents in the past 30 days. The consensus estimate for fiscal 2012 increased by a penny to $1.38 (and by 2 cents for fiscal 2012 to $1.51) over the last 30 days indicative of market optimism on the back of an improving environment and new products gaining traction.

Neutral on Hologic

Offering a wide range of products, Hologic has become an industry giant in the field of women's health products. Moreover, the company is also undertaking several steps, including acquisitions, international expansion and product development to bolster its top line. We are encouraged by the recent product approvals, which should help the company in recording higher sales going forward. Hologic also received a favorable ruling regarding injunction on sales of Adiana with its peer Conceptus ( CPTS ).

With the company's focus on the international market, revenues from foreign destinations have been recording steady growth. Hologic has been building its international infrastructure and fortifying management resources, particularly in the emerging markets of China, Latin America, Middle East and Eastern Europe. Revenues from the international market should accelerate following CE Marking of the MTA system and the SFDA approval in China for its Serenity digital mammography system (derived from the Healthcome acquisition). Serenity is a lower cost digital mammography system targeted for certain segments of the Chinese market. The stock retains a Zacks #2 Rank (Buy) in the short term.

However, the company continues to be affected by lower visits to physicians due to the prevailing economic uncertainty. Over the long term, we have a Neutral recommendation on Hologic.

About Earnings Estimate Scorecard

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