Morningstar | HOLX Updated Forecasts and Estimates from 29 Oct 2018
Narrow-moat Hologic posted solid fiscal third-quarter results that were generally consistent with our expectations, and we’re leaving our fair value estimate unchanged. Considering the time required to rebuild the aesthetics salesforce, we continue to hold tempered expectations for that business and don’t anticipate noticeable improvement until 2019. If progress with the field force moves along faster than expected, we could see that improvement pull forward into the fourth quarter, thanks to some seasonality. Nonetheless, we weren’t surprised that the aesthetics segment declined 18% in constant currency year over year.On the other hand, the reorganization and new leadership of Hologic’s international division has delivered impressive results, with growth of 14.5% in constant currency, fueled by both breast imaging and breast solutions. Even the in vitro diagnostic segment delivered decent results internationally. We expect this international strength can be sustained, especially considering the merits of Hologic’s diagnostic technologies and how the firm had previously devoted relatively little attention to international expansion. Moreover, we view Stryker’s earlier successful reorganization of its European operations as instructive for Hologic, because both CEO Stephen MacMillan and division president Kevin Thornal were involved while at Stryker. Thornal’s handiwork on Hologic’s EMEA division is evident in strong results in recent quarters. Now that Thornal is leading the rebuilding effort of legacy Cynosure, we’re confident that it is only a matter of time before the sales organization is staffed up, trained, and making calls again.
Hologic is a developer, manufacturer and supplier of diagnostics products, medical imaging systems, surgical products and light-based aesthetic and medical treatment systems. The company's segments are: Diagnostics, which provides diagnostic products which are used to aid in the diagnosis of human diseases; Breast Health, which provides solutions for breast cancer care for radiology, pathology and surgery; Medical Aesthetics, which provides aesthetic treatment systems, including SculpSure, PicoSure and MonaLisa Touch; GYN Surgical, which includes NovaSure Endometrial Ablation System to treat abnormal uterine bleeding; and Skeletal Health, which includes the Horizon DXA, a dual energy x-ray system.
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