On Monday, Jefferies initiated coverage on shares of Hologic (NASDAQ:HOLX) with a Hold rating and established a price target of $85.00. The firm noted that Hologic is larger and better capitalized than it has been at any point in its 40-year history, with a current market capitalization of $17.2 billion.
According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.02 out of 4, supported by strong liquidity metrics. However, it also pointed out that the company's revenues have declined approximately 30% from the peaks seen during the COVID-19 pandemic.
The analyst highlighted concerns about whether the approximately $2 billion spent on new business portfolios will support long-term revenue growth projections of 5-7% organically, as current top-line growth is expected to be around 3-4% for the fiscal year 2025.
The firm also mentioned several factors that make Hologic's near-term prospects uncertain, such as the lack of operating margin expansion opportunity with margins already around 30%, the complexity of the fiscal year 2025 guidance, and ongoing issues like the U.S. Preventive Services Task Force (USPSTF) recommendations.
Despite the stock being considered inexpensive at less than 13 times EBITDA compared to its peers, which average around 14 times, Jefferies suggests that the upside to consensus estimates appears limited. Based on InvestingPro's comprehensive analysis, which includes 8 additional key insights available to subscribers, the stock is currently trading near its Fair Value, with analyst targets ranging from $70 to $96. The firm also indicated that a rerating of the multiple is uncertain and may depend on various catalysts.
These include solid growth in the Molecular Diagnostics (MolDx) portfolio outside of the COVID-19 environment, USPSTF reaffirming co-testing, performance of new businesses leading to quarterly earnings surpassing expectations, and significant profit growth through tax leverage or operating margin expansion.
In other recent news, Hologic, Inc. has reported robust financial results for its fourth quarter and fiscal year 2024, with a total revenue of $987.9 million for the quarter, culminating in an annual revenue of $4.03 billion. The non-GAAP earnings per share (EPS) stood at $1.01 for the quarter and $4.08 for the year, indicating strong profitability. The company's segments, including Diagnostics, Breast Health, and Surgical, all reported revenue growth, with Diagnostics leading at 6.2%.
Hologic has also announced the addition of Dr. Martin Madaus, an industry veteran with over three decades of experience, to its Board of Directors. Dr. Madaus will also join the Compensation Committee and the Nominating and Corporate Governance Committee, bringing his extensive industry, technical, and international experience to the company's board.
In terms of future expectations, Hologic has provided an optimistic outlook for fiscal 2025, projecting a revenue between $4.150 and $4.201 billion and non-GAAP EPS of $4.25-$4.35. This projection is based on the company's recent developments, strategic acquisitions, and focus on innovation in women's health.
The company has also announced a $250 million accelerated share repurchase program, demonstrating its commitment to shareholder value.
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