Last week, Hologic HOLX earned two key regulatory approvals. The company’s Affirm Contrast Biopsy software has earned the CE Mark, having previously been cleared by the FDA in October 2020. Meanwhile, the Aptima SARS-CoV-2 assay, initially granted Emergency Use Authorization status in May 2020, has now achieved the FDA’s 510k clearance.

These advancements come after Hologic’s fiscal 2025 first-quarter report, released earlier this month, which reflected strengths and challenges within the divisions and from the broader macroeconomy. Since the earnings announcement, HOLX shares have plunged 10.4%, finishing at $65.01 yesterday. 

HOLX Stock Price Performance

So far this year, Hologic stock has declined 9.3%, lagging behind the industry’s 5.4% growth and the broader sector’s 6.2% rise. The S&P 500 Composite rose 1.5% in the same time frame. Despite the dip, the company has still performed better than its peers, Exact Sciences EXAS and QIAGEN QGEN.

Year-to-Date Price Comparison

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A Summary of Hologic’s Q1 Results

Hologic’sfirst-quarter revenues of $1.02 billion were consistent with the Zacks Consensus Estimate and its 1% growth target in constant currency. The Diagnostics division drove the growth, climbing 9.1% organically (excluding COVID-19) to $470.6 million, led by a 6.7% increase in the core Molecular Diagnostics. Cytology and perinatal business posted higher-than-average growth of 4.7% for the quarter. In contrast, revenues in the Breast Health segment declined 2.1% on lower sales of capital equipment, a challenge expected to persist throughout the year. Meanwhile, the International Surgical business stood out with 20% growth.

Hologic’s margins showed improvement, with the adjusted gross margin rising 80 basis points (bps) to 61.6%, driven by a favorable product mix and operational efficiencies. As a result, the adjusted operating margin expanded by 90 bps to 29.4%, also supported by disciplined expense management. Adjusted earnings per share (EPS) came in at $1.03, surpassing the consensus mark by 0.9% and up 5% year over year due to improved profitability.

Hologic ended the quarter with more than $2 billion in cash and investments and $189 million in operating cash flows, maintaining solid financial stability. The company also repurchased 6.8 million shares for $517 million, including completing the $250 million accelerated share repurchase program.

New Regulatory Clearances Boost HOLX’s Portfolio

The company’s Aptima SARS-CoV-2 Assay is an in vitro diagnostic test that detects SARS-CoV-2 RNA from nasopharyngeal (NP) or nasal swab samples obtained from people exhibiting signs and symptoms of a respiratory tract infection. With the virus now in an endemic state, full FDA clearance ensures that laboratories and clinicians can still rely on the test to make informed decisions about patient treatment and healthcare resource management. Of late, Hologic has received FDA clearance for several other respiratory tests that detect SARS-CoV-2.

On the other hand, the Affirm Contrast Biopsy Software is designed to work with the company’s Selenia Dimensions and 3Dimensions systems. The technology allows the targeting and acquisition of tissue samples in lesions identified on CEM (contrast-enhanced mammography), where a correlation using tomosynthesis or ultrasound may not be found. This makes it a strong alternative to MRI-guided biopsy. For patients who cannot tolerate MRI-guided biopsies, contrast-enhanced biopsy offers a smooth examination experience due to reduced noise and shorter examination time compared to MRI. The latest CE marking approval extends the reach of this technology, strengthening Hologic’s contrast mammography and biopsy portfolio.

Attractive Valuation for HOLX

Shares of Hologic are currently trading at a forward price-to-earnings (P/E) of 14.76X, much discounted than the industry average of 32.05X. A Value Score of B further adds to the appeal.

P/E Forward Twelve Months (F12M)

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Hologic’s Long-Term Prospects

Over the past decade, Hologic has grown its revenues at a 4.8% compound annual growth rate (CAGR), while adjusted EPS growth climbed at 10.8% CAGR — more than twice the sales growth pace. The company expects earnings to keep growing at a double-digit rate, supported by steady revenue growth. The BV CV/TV assay is still only halfway toward realizing its full market opportunity, offering strong expansion potential.

The Biotheranostics business remains a major growth driver, thanks to the ongoing adoption of the Breast Cancer Index test. In Breast Health, service revenues alone are now significantly larger than the gantry business, aligning with Hologic’s broader goal to diversify the revenue mix.

In the future, the company plans to leverage its M&A strategy to expand into high-growth adjacent markets and boost its top line. In January this year, Hologic acquired Gynesonics within the Surgical business, adding the highly complementary Sonata System to treat uterine fibroids. Additionally, the Interventional Breast business benefited from the Endomagnetics acquisition, which added $13.6 million to first-quarter revenues. The company is also driving innovation by building on its well-established brands, including Panther, Aptima, Genius and NovaSure, all of which generate strong, reliable cash flows.

Hologic recently introduced the AI-powered Genius Digital Diagnostics System in the United States and is preparing to launch the Genius AI Detection PRO, an enhanced version of the Genius AI Detection 2.0 solution with greater accuracy and efficiency. The Envision Platform, the first FDA-approved mammography technology of its kind, is set for commercial launch next year.

Internationally, Hologic sees a robust opportunity, as many of its top products remain vastly underpenetrated overseas. Surgical’s MyoSure, in particular, is seeing solid international growth from being the only minimally invasive alternative in many regions. Hologic’s continued focus on operational discipline and commitment to shareholder value instills optimism.

Hologic’s Updated 2025 View Disappoints

Several headwinds weighed on Hologic’s revised financial expectations for the year, with sales lowered by $100 million to a range of $4.05-$4.10 billion. The recent strengthening of the dollar is expected to have a $30 million adverse impact, as opposed to the original expectations of a $30 million tailwind. Geopolitical challenges remain a concern, impacting its performance domestically and internationally. As hinted above, the company expects lower Breast Health capital sales for the year, given the uncertainty in the gantry market and the delayed launch of its next-generation gantry.

Furthermore, new policy changes in the U.S. administration pose risks, with PEPFAR (President's Emergency Plan for AIDS Release) disruptions potentially reducing Hologic’s revenues by $30 million, while tariffs on Mexico-manufactured products could create pressure on gross margins. However, the company continues to expect to deliver adjusted EPS between $4.25 and $4.35 in fiscal 2025.

Our Take on HOLX

Following a modest Q1 earnings beat, Hologic’s new regulatory wins are a positive development. The company’s M&A strategy, solid financial footing and global expansion opportunities should also support its long-term growth potential. Therefore, those already holding HOLX stock may want to stay invested. However, ongoing macroeconomic and geopolitical shifts could impact its results in the near term, making it prudent for potential investors to wait for a more favorable entry point.

Hologic carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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